Liontrust Views Winter 2023 - Flipbook - Page 13
“Investing in equities should also be
a long-term consideration as that’s
where the real rewards lie.”
buying in when equities are more expensive,
These figures also demonstrate the benefits
basically paying more for investments you
of compound interest. Put simply, time is your
had previously held.
greatest friend as an investor. Compounding
refers to the benefit you get by reinvesting
Investing in equities should also be a long-
any returns you receive on your investment
term consideration as that’s where the real
each year rather than taking any profits. For
rewards lie. You are also more likely to
compounding to work its magic, it requires
meet your long-term goals by investing
the
continuously over a long period of time,
and time. A bigger pot of money each
rather than coming in and out of markets. This
year means the interest or returns you can
is amply demonstrated by the graph below,
potentially receive are greater.
reinvestment
of
investment
returns
which shows that a £100,000 investment
into a Cautious Managed Portfolio in March
Choosing the right level of risk for you is also
2009 would have been worth £206,053
key. By maintaining a diverse investment
by November 2022 – providing no
portfolio, you can spread risk, but there is
withdrawals had been made.
no point in selecting investments that you are
constantly worried about going up or down
In contrast, if an investor in the same fund had
– which takes us back to the need to take a
missed only the 10 best days in that period,
long-term view of your investments.
this figure would have fallen to £173,244.
This trend continues – miss the best 30 days
How much you allocate to higher-risk assets
and the final fund figure drops to £136,495;
such as equities versus lower-risk assets such
while an investor who missed out on the
as bonds will depend on factors including
50 best days due to coming in and out of
your investment objectives and your ability to
markets would have seen their fund return just
tolerate risk. Long-term investors are usually
£117,239 over the same period.
comfortable investing a higher percentage of
their money in equities because the risks can
provide greater rewards in the long-term.
£100,000 invested in a Cautious Managed Portfolio in March 2009
£250,000
£206,053
£200,000
£173,244
£151,249
£150,000
£136,495
£125,969
£117,239
Missing 40 best days
Missing 50 best days
£100,000
£50,000
£0
Fully invested
Missing 10 best days
Source: Liontrust, Morningstar. Cautious Managed Portfolio
represented by IA Mixed Investment 20–60% Shares sector
average £ total returns from 08.03.09 to 07.11.22.
Past performance is not a guide to future performance
Missing 20 best days
Missing 30 best days
LIONTRUST VIEWS – WINTER
13