David Prosser: Investment history rewritten?
Wednesday 23 December 2009
Outlook: Successive generations of Britons have grown up accustomed to received wisdom about investing: that while share prices can both rise and fall, over time equities tend to rise – and to outperform other asset classes. Well, as the feature on page 34 explores, that has certainly not been the case during the first decade of the 21st century.
Where does that leave financial planners, who have routinely advised savers to turn to the stock market when working towards long-term goals such as repaying a mortgage, funding a pension or putting a nest egg aside for the kids?
The short answer is that for genuinely long-term projects, the stock market should remain the asset class of choice for most people. Figures from Barclays Capital show that over the past 100 years, shares have outperformed cash in 93 per cent of 10-year periods and beaten bonds 83 per cent of the time. In that sense, the last decade has been a blip.
That, however, is a little glib. As every investment advert reminds us, past performance is no guide to the future. Even if it was, with people's faith in equities having been shaken more dramatically than at any time in living memory, we need more than statistics to comfort us.
Try Warren Buffett for size. There are so many witticisms to choose from, but one thing the Sage of Omaha once said rings especially true today. "If you're an investor, you're looking on what the asset is going to do," he said. "If you're a speculator, you're focusing on what the price of the object is going to do, and that's not our game."
Nor should it be the game of long-term savers. The value of companies that are well run and offer good products and services will eventually rise again.
- 1 Katie Hopkins gives rare glimpse of sensitive side with heartfelt open letter to her children penned in case she dies from epilepsy
- 2 Rihanna's Met Gala dress took one Chinese woman 2 years to make, was reduced to omelette meme in 2 seconds
- 3 Top Gear: Jodie Kidd, Philip Glenister and Guy Martin 'in advanced talks' to replace Jeremy Clarkson and co
- 4 Frankie Boyle on Scottish independence: 'In the Interests of Unity, F**k Off'
- 5 Florida couple forced to register as sex offenders for having sex on public beach
Boston Marathon runner's search for mystery man she kissed ends with letter from his wife
Italian police 'reveal' what Jesus looked like as a young boy
Florida couple forced to register as sex offenders for having sex on public beach
Mysterious 'X-Files' sounds heard miles above the Earth
Met Gala 2015: Beyoncé manages to out-skimp Rihanna, Miley and Kim Kardashian with near-naked ensemble
In defence of liberal democracy
General Election 2015: Post-election 'shambles' looms as 70 per cent of voters say SNP 'should not be able to veto UK government policies'
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
iJobs Money & Business
£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...
£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...