Page 31 - DIY Investor Magazine | Issue 39
P. 31

        ‘OVER EVERY 20-YEAR TIMEFRAME IN THE PAST 96 YEARS, EQUITIES HAVE DELIVERED INFLATION-BEATING RETURNS’
Time is the critical factor; over very short periods – three months or less – there has been little difference in the likelihood of cash or shares beating inflation.
But for longer periods the gap widens conclusively; over every 20-year timeframe in the past 96 years, equities have delivered inflation-beating returns.
Higher returns on cash may well make the balance of options more finely poised, particularly for investors with shorter time horizons. But history suggests equities could continue to deliver better outcomes over the longer-term, both in nominal and real terms.
MANY OTHER FACTORS MATTER TO INVESTORS
The returns on offer from different asset classes will play a major role in determining the decisions that investors make; as that risk-reward dynamic evolves, what matters to investors may change.
But in other respects, the things that matter to investors are relatively static.
The Online Investing Report produced by independent research business Boring Money explored the various wants and needs of the modern investor. It found that trust and peace of mind were the foundations upon which many investment
decisions were built, with other factors such as the quality of communications, value for money and customer service also ranking highly.
Peace of mind may come in many forms, however. For some, the certainty offered by a savings account is more likely to result in a good night’s sleep than seeing the value of their investments swing up and down.
For many other investors, short-term volatility is merely a means to an end – they understand it must be tolerated if inflation is to be beaten in the long run.
As the chart below illustrates, global equities fell by at least 10% in more than half of the last 50 years.
They usually – but certainly not always – recovered to post a positive return for the year as a whole, but the prospect of loss is an ever present risk for equity investors in the short term.
So, investors who opt for stock markets over cash need to be prepared for a bumpy ride.
31
Nov 2023
DIY Investor Magazine ·
   

















































































   29   30   31   32   33