Paul Taylor’s guide to long term compounding on the ASX (plus a 3-stock portfolio for the bottom drawer)

Last month, Fidelity marked the 20 year 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 from inception to now. The fund's generated 11% per annum over the two decades, through some of the worst crises markets have dealt with. The Global Financial Crisis, the European sovereign debt crisis, COVID-19, and the Russo-Ukrainian war. The list goes on. How's 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. Usually something about focusing on fundamentals.  In today’s episode of The Rules of Investing, Paul gives an actionable step by step process that all investors can follow to turn down that noise. 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.  Timestamps 0:00 - START2:00 - 20 years of volatile markets4:00 - 4-step process for blocking out noise8:00 - Making moves during the GFC16:00 - Second order affects18:50 - The next buying window20:30 - Banks in the firing line22:50 - Preserving capital25:40 - Don't pick stocks in isolation28:50 - Finding long-term compounders32:50 - The secular tech rally36:30 - Glass half full39:40 - Buying WiseTech Global (ASX: WTC) early 42:50 - A 3-stock portfolio for the bottom drawer