Investment Performance: What a difference a day makes

Few forces have as big an impact on your wealth as time. Ultimately, while any year can result in a large rise of fall for equities, returns tend to average out over longer time horizons. So, the longer you invest, the more likely it is that your returns will look like the average.

Each year, we provide clients with a review of their pension and investments and as part of this, we are obliged by law to give a valuation. Many people get quite fixated on this figure, but the reality is that this is purely a snapshot on a particular day.

The markets are nothing if not volatile – these last couple of years have taught us that – and because of this, the timing of the review can have a big impact on the valuation provided at that time. It can also impact how things look from a performance perspective.  It may be that if you look at your valuation a month or even week earlier or later, the story could be very different. 

A picture of market volatility

The graphs below demonstrate just this. They clearly show just how volatile the markets have been – no straight lines here – but they also show how different the performance looks depending where in the year you start your 12 month period. The graph on the left looks at performance Aug22 – Aug23, while the one on the right looks at Oct22 – Oct23. Although you are covering many of the same months, because markets were so much higher in August 22 than in Nov 22 (courtesy of the Truss / Kwateng mini budget) it has completely change the performance landscape.

Whilst it is important for you to be aware of the valuation of your pension and investments that we provide in your annual review, it is also important to understand that it really is just a snapshot of a moment in time. It is far more valuable to look at the longer term performance – we often say that you need to take a seven to 10 year view of your funds to really see how they’re performing.

As always, we will focus on ensuring your investments are invested at the correct risk level for you, are rebalanced annually and the cost is kept as low as possible.  These are the biggest things that will impact your investment returns over the longer-term.