What Can We Learn from the Past Decade?Daniel Hardiman
Do you remember 2013? It sounds quite recent, but then when you think about the major events that happened that year, they seem so long ago. That was the year that Nelson Mandela died at the age of 95, two homemade bombs ripped through the crowd of fans and runners at the Boston Marathon finish line, killing three and wounding nearly 300 others and Typhoon Haiyan killed over 6,000 people in the Philippines and south east Asia. It was also the year the word “selfie” became mainstream!
2013 was also the year that if you had invested money in the MSCI World Index at the end of March, 10 years later you would have enjoyed annualised returns of 9.44% p.a., even with the falls over the last 12 months. Even more telling is that interest rates were at 0% for much of this period, resulting in deposits being a very poor alternative in comparison.
So if you had the chance to step back in time in your financial life, what might you have done differently? The value in doing this is that while of course past performance is not a guide to future performance, there are always lessons to be learned. Here are 3 lessons that we think you can take away from the last decade.
A long term perspective usually pays off
When it comes to investing, enough time, patience and the power of compound interest are powerful forces. Even though this 10 year period saw an approx. 30% fall when Covid hit and another big sell-off as a result of the war in Ukraine, investors have been well rewarded, particularly with money in the bank not increasing in value.
Being invested in global markets for sufficient time and staying in the markets has rewarded investors over most 10 year periods. The last 10 years are a great example of this. Time in the market is key, as opposed to trying to time the markets. Investors who stayed the course over the last decade and didn’t panic when markets fell, were well paid for their perseverance – remember that 9.44% p.a. growth figure…
So having a long term perspective and letting markets get to work for you are valuable lessons.
Continuous saving is important too
As we said above, investors who had money invested 10 years ago have done very well, However people who continued to save over the decade did even better. By continuing to save, you are actively growing your wealth yourself as opposed to just relying on the markets. These additional savings also enjoyed the growth over the last decade. Even when markets fell during this time, the regular saver was buying assets at these points in time, at effectively reduced prices. Who doesn’t like buying things at a “Sale” price?
Money is an enabler to help you live a fuller life
We are firm believers that the scorecard is not about how much money you have, it’s about what this money does for you. And we think the last decade has given us more lessons in this vein than most periods before that. Indeed, the “Covid years” taught us lessons that hopefully will stand to us for the rest of our lives.
The pandemic taught us all so much about the importance of health, the value of having access to an emergency fund for unforeseen events and having a financial plan that is resilient in the face of the most unexpected events. Covid taught us that a pandemic doesn’t select people based on means. It also taught us the importance of living the best life that we can, while we are able to do so. Seeing the suffering of the population of Ukraine in the last year just highlights this further.
Don’t just focus on having more money and risk being the richest person in the graveyard. See money as a means to helping you to live the best life possible and make that your target.
I wonder what valuable lessons we’ll learn over the next decade?
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