Unfortunately, many people in this world will never get to experience and benefit from the huge wealth that investing in global equities can bring.
The idea that by investing in global stocks and shares, their money could fall in value, sometimes sharply and significantly, will be too scary for some. After all, we as humans experience the pain of losing at twice the rate of the happiness of making a gain.
However, investment volatility is not a bug. It’s not something that should be feared or supressed.
Investment volatility is not the problem. It’s a lack of investment knowledge that is the problem.
The best businesses, the best minds
Let’s take a step back. When you buy units in a global equity fund you become an owner of hundreds and sometimes thousands of the great businesses of the world. These businesses are run by the brightest minds in the world all with the goal of improving the products and services they offer and increase shareholder’s value.
What’s more, many of these businesses will be the companies that you use and buy from every day, so you probably understand them more than you think. You know they are good and popular otherwise you wouldn’t be using them.
Back to volatility though. Yes, it is true that the values of these great businesses can fall significantly from time to time as investors around the world react to the changing news that is published 24/7.
Remember most news is negative, negativity sells so at some point it’s going to impact behaviours.
It’s not a shock though. Most of the time stock markets fall at some point during a year. In fact, the average intra-year decline for the S&P 500 index (500 of the world’s biggest companies) is around 15%.
The odds are in your favour
You don’t need to worry about any of this though as long as you have time on your side and someone will always have time on their side unless they are in the last few years of their life.
Young and just started saving for your long-term future? Plenty of time until you retire.
About to retire? You still have potentially 30 years in retirement where your money needs to at least keep up with the rising cost of living otherwise it will run out.
As long as you have time on your side the odds of a positive gain from your investments are actually very high.
Since 1926 the global equities sector has been up 77% of the time. Which is bit like saying on average four out of every five trading days, 40 weeks of the year and eight years out of 10 will deliver a positive investment return.
Even if you just looked at the UK stock market you will find it has been positive 74% of the time.
Over the last 98 years there have only been five years when the investment return of UK stocks was between -10% and -20%, three years when the return was between -20% and -30% and only one year when the return was worse than -30%.
Even though your chances of investment success are massively in your favour there are still some years when you could find your investment significantly down in value.
So, let’s go back to our investment friend and superpower: time.
If we break the last 98 years into lots of rolling 20-year periods you actually find there is not a single 20-year period when the global equity sector makes a total loss.
So hopefully now you have the education to become a global equity investor. To find a fund that aligns with your interests and invests in the exciting future that is to come.
To enjoy an investment success story and end up truly wealth you need to be an optimist, not a pessimist.
Carl Roberts, Director
If you want to learn more about this topic, please find the link here.
More information about our fund the YFS Intelligent Wealth Fund can be found here: Hargreaves Lansdown or AJ Bell
Risk warnings
The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs practice. Levels and bases of tax relief are subject to change. This blog is based on my own observations and opinions.
