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March 21, 2022

Keep your ‘Eyes on the Prize’


in Financial Planning Insights Research

2022 has not got off to the greatest of starts and at the end of last month (28.02.2022) a balanced investor is likely to be down over 4%, based on the general industry averages (MSCI Balanced Private Investor Index). Volatility certainly seems to be back with us, albeit 2021 was historically low. Despite all the ups and downs it is sometimes worthwhile stepping back from all the noise and keeping your eyes on the prize.

If you focus on the long-term rolling average of the same MSCI Balanced Private Investor Index the value is 7.17% over 5-years, 8.60% over 10-years and 8.77% over 15 years (as shown on the chart below – orange bars). Now these may be industry average returns, which any good investment managers will strive to beat, however you must remember they are calculated before any fees are deducted (gross data).

So a realistic average annual net return (after fees) for a balanced investor is more likely to be in the region of 6% to 8%, subject to the cost of investing. If we take the middle number of 7% net return and allow for compounding then a balanced investor should typically double their money in a little over 10 years. This is assuming no withdrawals are made over the period.

In addition to these investment returns a well-structured and long-term smart financial plan ensuring you make the very best use of all your tax allowances, can ensure you keep the majority of your gains, and in some circumstances can even improve the returns.

A couple who committed to investing the maximum of £20,000 per annum in their ISA (£40,000 in total) each year on a balanced mandate, targeting net returns of 7% could have a joint tax-efficient investment pot of £1,075,522 after 15 years – the power of compounding!

So despite all the noise and ups and downs of the stock markets try to keep your eyes on the prize, investment is less on timing the markets and more time in the markets.

Risk warning: This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a personal recommendation. The figures quoted are for illustration purposes only.  With investing, your capital is at risk.