While the selloff in global equity markets this year has been unpleasant, it was not unusual.
Listen to this interesting podcast featuring Andrew Macken and Chris Demasi from Montaka Global Investments where they discuss a hypothetical stock portfolio constructed with perfect foresight - Let's refer to it as 'God's portfolio' - would deliver stratospheric long-term returns… but still could not avoid agonizing drawdowns.
Wesley Gray, Phd, an asset manager and former US Marine, published a paper in 2016 concluding this which is discussed in our blog here: https://montaka.com/blogs/accept-the-drawdowns/.
Over the 90-year investment horizon, God’s portfolio compounded at more than 29% per year which would have turned an initial investment of just $1 into almost $12 billion! (The S&P500 index of the top 500 US listed stocks returned on average just under 10% per year in this time and a $1 investment would have grown to about $5,000.)
While the theoretical value created by God’s portfolio is no doubt staggering, the drawdown profile is more astonishing. Instead of protecting against large reversals in fortune, God’s portfolio endured the pain of drawdowns that exceeded 20% on ten different occasions. The worst of these was a 76% decline over almost three years in the Great Depression – not dissimilar to the stock market’s 85% drawdown around the same time.
Must listen to this interesting discussion around #sell-off #investing and the #volatile #global #equity markets.
Disclaimer: Issued by Montaka Global Pty Ltd ABN 62 604 878 533, AFSL 516942. This information is general in nature and does not take into account your specific needs or circumstances. You should consider your own financial position, objectives and requirements and seek professional financial advice before making any financial decisions.
