01 May 2019

Spring time investment lessons

As we see the tulips blooming, I am reminded of ‘tulip mania’. I’m sure you are all familiar with the story of how the prices of highly fashionable tulip bulbs reached extraordinarily high prices and then dramatically collapsed in 1637, ruining many an investor

Still, it’s a scenario that constantly appears, when investors try to follow what is ‘hot’, whether it’s a product, a sector, a theme, or a particular country. Sometimes the burns experienced are dramatic, such as the tech boom and bust, other times, the ‘trendy’ funds just seem to fall out of favour and disappear. If we look at the world’s biggest market, the US a large proportion of funds fail to survive over the longer term. Of the 1,622 fixed income mutual funds available to investors at the beginning of 2004, only 55% still existed at the end of 2018. Similarly, among equity funds, only 51% of the 2,786 funds available at the beginning of 2004 endured.

The moral of the story? Fashionable investment approaches will come and go, but investors should remember that a long-term, disciplined investment approach based on robust research and implementation may be the most reliable path to success in the global capital markets