We listen to and talk with investment professionals most days.
We can access the thoughts and analysis of the best.
And in periods of volatility, they will do one of two things.
They will either say
“Pay no attention to macroeconomic noise, it doesn’t assist in generating long term outsized returns.”
Or
“This is how we think it will go and these are the few elements within the maelstrom we think of as key”
Unfortunately, as with everything else to do with making investment decisions, there is no right answer that holds true in all circumstances.
We are more in the camp of pay no attention, but there are times such as the financial crisis of 2008 and the Covid pandemic where that would be negligent.
So, the question really is:
Is what is happening a systemic event with the potential to change things permanently or just natural ebbs and flows, so transitory?
Apple
The temptation when markets drop quickly (the downs are generally far more rapid than the general grind higher) is to become fearful of why and to listen to the predictions of much more pain to follow which always accompanies. Fear is the number 1 best seller for media.
As an investor all one needed to do over the last 12 years to achieve stellar returns was to buy Apple shares.
The share price of Apple in 2009 adjusted for stock splits was about $4
The share price of Apple in the following 12 years.
Dropped 57% from its high during 2009
Dropped 47% from its high in 2013
Dropped 33% ………………. 2016
Dropped 39%……………….2018
Dropped 31% ……………..2020
These were intra year falls so not the annualised returns for those years.
Annual returns were worst in 2000; -71% and 2008, -56%
So, an investor bought £10,000 of Apple shares Jan 1st 2009, endured all the volatility, received the dividends and looks today at the value of that investment.
It’s around £716,000
Note: Please note LWM cannot advise on shares, and this should not be seen as advice to buy shares. Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise. Data sourced from Morningstar.
This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog, and the reader should accept that by its very nature many of the points are subjective and opinions of the author. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought).