2013’s Winners and Losers
It is always interesting at this time to look back and see the winners and losers of last year.
The unusually strong performance of world stock markets was a welcome surprise but a source of exasperation for many professionals caught flatfooted by the steady rise in share prices.
The US stock market (S&P 500) posted its best return since 1997 whilst our own FTSE 100 delivered over 14% (it’s best year since 2009).
To some experts, it wasn’t supposed to look like this. A prominent economic forecaster who predicted the downturn in 2008 suggested that four elements—stagnating US economic growth, the European debt crisis, a slump in emerging markets, and military conflict in the Middle East—could combine and lead to a “superstorm.”
None of this came to pass however and as well as broad market gains small and value company shares again delivered the best returns of 2013. Interestingly enough emerging markets offered the poorest returns – falling by almost 5%.
One of Brett Investment’s principles is that ‘forecasting is folly’. Who can reliably say which asset class (or market) will fare best in 2014. You can waste a lot of time and money predicting markets and making decisions based on what the ‘experts’ think. The truth is that they get it wrong more often that they get it right.
One way of doing better would have been to adopt our ‘BettrInvest’ approach of buying the global stock markets and then increasing the exposure to small and value companies (academic research show that these shares have a higher expected return).
This worked as the equity part of our ‘BettrInvest’ portfolios increased by over 20% in 2013.
(Source: Dimensional Fund Advisors/Nucleus/Trust Net)
Note: past performance is not a reliable indicator of future results.