Paul Taylor's guide to long term compounding on the ASX

This article first appeared in Livewire markets on 14 July 2023

Last month, Fidelity celebrated the 20th anniversary of its Australian Equities Fund. The fund has consistently outperformed its benchmark, the ASX 200 Accumulation Index, netting over 11% per annum.

Paul Taylor, Head of Investments at Fidelity International, has captained that ship since its inception.

The fund's generated 11% per annum over the two decades, through some of the worst crises markets have dealt with. From the Global Financial Crisis, to the European sovereign debt crisis, COVID-19, and the Russo-Ukrainian war, the list goes on.

How has he done it? Well, he turns down the noise. When I speak to fund managers, I often get a general response about how to do that. Typically something about focusing on fundamentals. 

In today’s episode of The Rules of Investing, Paul gives an actionable step by step process to turn down the noise that all investors can follow. 

He also goes deep explaining his process for finding what he terms the “holy grail” of investing – long-term compounders, identifies the market’s next buying window, the need to view stocks and their upside potential within the context of portfolio construction, and the next thing to break if rates keep rising. 

And as a little kicker at the end, he provides a [hypothetical] 3-stock portfolio for the bottom drawer. 

Note: This interview was recorded on July 11, 2023. 


0:00 - START
2:00 - 20 years of volatile markets
4:00 - 4-step process for blocking out noise
8:00 - Making moves during the GFC
16:00 - Second order affects
18:50 - The next buying window
20:30 - Banks in the firing line
22:50 - Preserving capital
25:40 - Don't pick stocks in isolation
28:50 - Finding long-term compounders
32:50 - The secular tech rally
36:30 - Glass half full
39:40 - Buying WiseTech Global () early 
42:50 - A 3-stock portfolio for the bottom drawer