06 Mar 2019 2 min read

Mary Poppins, diversification and the magic of compounding

By Christopher Jeffery

As 'Mary Poppins Returns' hits the cinema, we ask what the original film can teach us about investing

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Dick Van Dyke may not have won an Oscar for his portrayal of Mr Dawes Senior in the original Mary Poppins film, but he did teach a generation of children about the merits of taking a long-term perspective to investments, the importance of diversification and the magic of compound returns.

On the Multi-Asset team at LGIM, we rarely (but not never) break into a song and dance routine. But Van Dyke's central tenets are pretty closely replicated in our investment beliefs. As 'Mary Poppins Returns' hits the cinema, we should celebrate the financial wisdom of the original.

The film is set in 1911, long before regulation of financial advice came into force. Without even a cursory 'know your customer' investigation, the custodians of the Fidelity Fiduciary Bank start reeling off a list of potential investments to the young Michael Banks.

Railways, dams and canals are all suggested as suitable investments for a seven-year old. Before he has had a chance to carefully consider the risk-return trade-off inherent in such infrastructure assets, his head is set spinning with talk of “bonds, chattels, dividends, shares”.

Amid the chorus line of umbrella-wielding bankers, three important points emerge:

  1. Michael’s tuppence should be invested “patiently”. That sounds like an invitation to invest for the long term.
  2. Michael’s tuppence should be invested in “all manner of private enterprises”. That sounds like a suggestion to diversify to mitigate investment risk.
  3. Michael’s tuppence should be invested “safe and sound” and “soon that tuppence … will compound”. That sounds like a celebration of the power of compound returns. 

At no point is young Michael told that 'the value of his investments may go down as well as up' or that 'the past is no guide to future performance'. But, if we put the potential miss-selling scandal in late Edwardian London to one side, there are some important financial lessons for all of us.

As broad principles to follow, rather than specific investment advice, they strike me as being “practically perfect in every way”. 

Christopher Jeffery

Head of Inflation and Rates Strategy

Chris works as a strategist within LGIM’s asset allocation team, focussing on discretionary fixed income and systematic risk premia strategies. He coordinates global rates and inflation strategy across LGIM’s asset allocation and fixed income capabilities. He joined LGIM in 2014 from BNP Paribas Investment Partners where he worked as a senior economist and strategist within the Multi-Asset Solutions group. Prior to that, he worked as an economist within monetary analysis at the Bank of England with a focus on the UK domestic economy. Chris graduated from University College, Oxford in 2001 with a first class degree in philosophy, politics and economics. He also holds an Msc in economics (research) from the London School of Economics and is a CFA charterholder.

Christopher Jeffery