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EDUCATING
SUPPORTING
REPRESENTING
www.charteredaccountants.ie
How Should Private Investors Respond
To Volatile Markets?
Daniel Moroney
Investec Wealth & Investment
The Macro Picture – Debt Overhang
History Repeats
Source: Reinhart & Sbrancia 2011
Global Interest Rates Are Historically Low10 year Government Bond Yields
Netherlands: Lowest yield in 499 years of data
France: Lowest yield in 267 years of data
Spain: Lowest yield in 223 years of data
Japan: Lowest yield in 146 years of data
Source: Deutsche Bank
Through The Looking Glass…
Source: The Wall Street Journal
Changing Our Mindset
What’s Your Return?
The Percentage Gain?
What about Inflation?
The Return of Financial RepressionA REAL ‘risk-free’ rate of minus 0.6%
Changing Our Mindset
What’s The Risk?
Volatility?
Really? What’s your time frame?
‘Safety’ Is ExpensiveExpected Return Analysis
Your Time Horizon Is Longer Than You Think
Long-Term Investors Have The Advantage
Equity Market Drawdowns: PERFECTLY NORMAL!
• Average Return of +8%
• Average drawdown of -14.6%
• Even in up years (32 of the 44 years),
annual drawdowns averaged -10.8%
The ‘Wall of Worry’
The Behaviour Gap
The Behaviour Gap In Effect
Source: JP Morgan Asset Management
What To Do?
Make A Long-Term Plan
Be Realistic In Your Expectations
STICK TO THE PLAN!
