The comfy armchair ride global share investors experience during 2017 turned into a white-knuckled roller-coaster in 2018.
Key global share markets came under significant selling pressure from September on, with the US market falling sharply as the year ended.
After starting to fall in late 2017, residential property price falls accelerated in Sydney and Melbourne during 2018, while Hobart rose strongly.
Cryptocurrency, the investment mania of 2017, crashed in spectacular fashion, with Bitcoin falling 80% during 2018 .
2018 proved there is no such thing as riskless returns, and that the occasional burst of volatility is the price of admission that all investors have to pay to receive returns better than Cash (i.e. 0% p.a. after inflation and before tax).
Low-cost diversification is still the single best way to get your fair share of market returns without flaming out on a single bet (ahem, #CryptoLife).
In our 2018 Financial Year in Review (for the year to 30 June 2018) we spoke about the unusual calm that had dominated markets during 2017, noting that “… 2017 produced a Goldilocks-like investment environment of steadily rising asset valuations.”
Unfortunately, as anyone who is familiar with the fairy tale knows, Goldilocks made herself at home in a stranger’s house, assuming it was a riskless act, only to be surprised by three angry bears unimpressed by her sense of self-entitlement.
As with Goldilocks, many share investors were lulled into a false sense of security during 2018, only to be mauled by a bear of a market.
About a year ago we wrote a piece on a remarkable bet between Warren Buffett and hedge fund-of-funds manager Ted Seides. The premise of this one million dollar bet instigated by Buffett was that over a 10 year period beginning 1 January 2008 a simple S&P 500 index fund would outperform the best, most complex strategies that any Wall Street hedge fund guru would care to put together.
Another year is behind us. 2017 was a year where politics, both global and domestic, seemed to dominate the news, from the ongoing turmoil in the White House, to the Parliamentary citizenship debacle here, and the historic passing of the same sex marriage legislation just as the year drew to a close.
On the investment front, most markets and asset classes delivered returns significantly above the forecasts of a year ago. 2017 was a year in which risk was amply rewarded, with global sharemarkets in general, and emerging markets in particular, producing outsized returns for investors.
Clover portfolio options benefited from the strong run up in global sharemarkets during 2017, in being constructed to provide more exposure to international shares relative to Australian shares, a positioning that added to relative returns during the year.
For as long as investing has existed in its modern form, there’s been an ongoing debate about what is the best investment philosophy. While there’s passionate opinions on each side of the fence, we think the obvious way to decide is to look at the data. Thankfully, there are studies that have looked at the results of more than 2,000 funds and compared these to historical outcomes. In this post, we’ll look at the evidence of both Active and Index-Based Investing, and share why we’re confident in our approach.