Has the Easy Money Been Made?

by | Oct 4, 2018 | Commentary & Insights | 0 comments

It’s clear that the longer this bull market carries on the more investors will worry about the next downturn or correction.

These worries are usually accompanied with big headline predictions about what will happen, when it will happen and why it will happen. As we’ve said in the past, we try to ignore these headlines as they are often wrong, don’t consider individual circumstances and are usually published for the sole purpose of attracting attention.

As an example, the following headline on CNBC caught our eye, though probably not for the reasons it was published. Howard Marks, famous investor and co-chairman of Oaktree Capital, says:


“…easy money has been made in the market, don’t chase it.”


He may well be right, but this is not the first time we’ve heard this. As the below graphic shows, since 2009 this has been a regular headline almost once a year in the US.


Source: Morgan Housel, Twitter: https://twitter.com/morganhousel/status/1034447231967887360


This got us thinking. Is there even such a thing as easy money when it comes to investing?

Let’s use an example to explore this: if you had invested £10,000 into the FTSE All Share (UK Equity Index) 30 years ago, forgotten about it and left it there to grow, by the end of last year it would have increased to £48,525. That sounds very much like easy money!

That would be a total gain of £38,525 for doing absolutely nothing other than remaining patient and sitting on your hands. No perfect market timing, no sophisticated day trading or complicated investment strategies, just pure buy and hold and a suitable time horizon.

However, though it sounds easy, this is actually far harder to do in practice than most anticipate. To illustrate, look at the following chart:


Source: FE Analytics, FTSE All Share Index. Total returns are in GBP. Data as at 31/12/2017


As you can see, if you had tracked the progress of your £10,000 over the 30-year period, you wouldn’t have seen a straight line go all the way up to £48,525. What you would have experienced is your funds dropping by more than 30% (c. £15,000) twice during this period alongside many other smaller corrections of 10-20%. In addition to these actual falls in value there would have been multiple news headlines, “friendly” advice, or investment articles frequently providing you with a potential reason to sell, making the journey even harder.

Ultimately, the only easy money is that which has already been made. As it does with most things, hindsight makes investing look deceptively easy but in reality, it is anything but. Remaining disciplined and sticking to a strategy when there are so many voices and headlines telling you otherwise is difficult. However, if history is anything to go by, those that have remained invested, let their investments grow over time and stuck with a suitable strategy have been rewarded.


Click here to download this post


General Disclosures: This article is based on current public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.


All our emails include an unsubscribe link and you can opt out at any time. Please see our privacy policy for more on how we take care of your information. (If you’re one of our lovely clients you’re already on the list!)