The experience gained from many years of serving large and professional private investors and family offices shows that the greatest danger for an investor is to drastically reduce the (supposed) risks in his portfolio in times of unsatisfactory capital market performance, contrary to his objective risk capacity, and then to miss the upturn in the markets. The last two years are the perfect example of this danger. Admittedly, sitting out losses requires a certain degree of (subjective) risk tolerance. In this respect, we would like to repeat our advice of recent years: investors should invest a lot of time and thought into defining a long-term, robust and sustainable investment strategy and its implementation.
All too often this extremely important issue is pushed into the background in favour of only supposedly important issues (costs of asset management; costs of advice; costs of analysis). The average annual (annualised) growth in value of an investment in the Swiss stock market was approximately 7.9% in the period from the beginning of 1926 to the end of 2019. Anyone who, according to our analyses, had invested CHF 1,000 in shares at the beginning of 1926 would have increased this amount to CHF 1,230,000 by the end of 2019. With an average annual fee of 0.5% and taking into account the compound interest effect, the investor in this example would still have had CHF 791 000 at the end of the day. Over an investment horizon of 94 years, he would have become almost a millionaire.
An investment in Swiss bonds would have yielded much less over the same period. The CHF 1000 initially invested would have turned into CHF 50 000 (before fees), a return that would hardly have remained positive after adjustment for inflation.
Good advice and a long-term perspective can make a big difference.
Quelle: Jacques Henry, Nadia Gharbi | Pictet Wealth Management | Januar 2020