The cautious investor

Rising interest rates that offer ‘certainty’ often appear a good solution for investors in an uncertain world. The thing about uncertainty of course is that it’s always present. You can remain holding cash in deposit accounts for years, trying to avoid market falls in the belief you are being prudent; sensible with your money. The uncomfortable truth is that we won’t know if you were right until many years down the road.

What we can do is look back at history and observe how missing out on returns impacted the valuation of portfolios, even if it was simply for a week or a month, the impact of sitting this one out can have (and has had) a substantial impact on portfolios. Second truth bomb – I have no idea when this might happen again. I don’t have a crystal ball to be able to predict such things.

I came across this neat little video by Dimensional (an excellent Investment Management firm with the unusual evidence-based approach whilst clutching a bunch of Nobel prize winners for their work in finance and economics). The data considers January 1997 until the end of 2021.

The key for investors, as it is in many aspects of life, is one of patience.