With the FTSE 100 having suffered its biggest one-year fall since the financial crisis of 2008 we reveal your portfolio’s winners and losers for 2018. As is often the case in market slumps, Short-Dated Global Bonds showed their value by providing a positive, albeit small, return over the calendar year. If anything these results demonstrate the futility of trying to trying to forecast (and predict) each year’s winners and losers (Short-Dated Bonds coming in 8th place in both 2017 and 2016).

Diversification is Essential:

It’s tough, if not impossible, to know which market segments will outperform from period to period. Allowing emotions or opinions about short-term market conditions to impact long-term investment decisions can lead to disappointing results. Diversification is your friend. It spreads your investment risk around meaning your portfolio holds the shares and bonds of many thousands of companies throughout the world. This means the negative and positive influence of each individual investment is reduced, producing, on aggregate, less risk in your portfolio.

The patchwork dispersion of the colours below show no predictable pattern and helps illustrate why we believe it is pointless to try to predict which asset class comes out top on a year-on-year basis. It is better to hold a bit of everything.

To end, we also believe in the power of the capital markets and that over time risk assets (shares) will deliver a positive return. If you don’t believe me have a look at the table below…and it’s supported by academic evidence. They call our approach to investing ‘buy and hold’. The only problem with it though is that is not very exciting and is pretty dull! It does however have one distinct advantage…it works! Just ask the academics!

(Source: Dimensional Fund Advisors/Vanguard)

Past performance is shown net of Dimensional  fees/Vanguard funds are chosen gross and are per annum. Past performance does not necessarily indicate future performance. The investment return and principal value will fluctuate so that an investment’s shares/assets, when redeemed, may be worth more or less than their original cost.