David Kuo: The past 10 years have been tough, but steady saving still works
Sunday 19 June 2011
It has been a trying and frustrating decade for stock market investors.
There is the age-old view that investors who hold shares for the long term will be rewarded for their patience. The FTSE 100 index is lower today than it was at the start of the millennium. So where is the risk premium that stock market investors expect?
The disappointing return from investing in shares has prompted critics of "buy and hold" to question the rationale behind long-term investing. However, Gus Sauter, chief investment officer at Vanguard, recently warned against the idea that short-term trading could be a better substitute for long-term investing. His views will undoubtedly grate with short-term traders who believe they can beat the market by correctly timing the movement of shares. Truth is, it is time in the market rather than timing the market that adds value to investing in shares.
However, not everyone believes that buy and hold is a smart strategy. Some will argue that while the market may have delivered returns of about 10 per cent a year over the past century, the next 20 or 30 years may be very different.
Investors have walked away empty handed because shares have gone nowhere. But that applies only to those who invested at the top of the market and have not bought shares since. Most people don't invest like that. Instead, most of us keep adding money to shares when we can. So, while it is right that any investments you made around the turn of the millennium may be in the red, any money you added around 2003 would be firmly in the black – up about 60 per cent. The lesson here is that the investments you make every year will produce a different return. Some people call it pound-cost averaging. I just call it common sense.
David Kuo is director of fool.co.uk
Compare with the Independent: See how much you could save by switching credit cards. Compare now
- 3 Sir Patrick Stewart patches into David Cameron and Barack Obama's Ukraine talks with packet of wet wipes
- 4 Study suggests that 'gaydars' are real - at least for women
- 5 Man stabbed with Legend of Zelda Master Sword in serious condition
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
iJobs Money & Business
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...
£30000 - £40000 per annum + benefits: Pro-Recruitment Group: Personal Tax, FTS...
Day In a Page
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew