Why a long-term investment view is the answer

12 August 2022

3 minute read

 We explore how a long-term investment view can pay.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

Please bear in mind that tax and pensions laws can change and that their effects on you will depend on your individual circumstances. We don’t offer personal advice.

Stock market downturns are part and parcel of investing. So far this year stock markets have been tough to say the least and many investors might be feeling uneasy about how their own investments are coping.

For those who are checking their ISA or SIPP portfolios, the picture since the start of the year is less than rosy for most.

But as with any difficult situation, it’s important to gain perspective. In the world of investing, this means looking at longer term performance.

Smart Investor customers who choose their own shares and funds will have different strategies and therefore their portfolios will have performed differently.

Our Barclays Ready-made investments (RMI) provide the opportunity to illustrate where careful asset allocation (the blending of cash, shares, and bonds) and long-term investing can pay.

They are designed to give you a well-diversified portfolio and are monitored by our team of professionals. Ready-made Investments are suited to investors who are short on time or perhaps not sure where to start when it comes to choosing the right mix of investments.

Customers can choose from one of five funds based on the level of risk they feel comfortable with.

Each invests in shares, bonds and cash to help spread risk but are all slightly different. You just need to read about the characteristics of each fund and choose the one that sounds most suitable.

Looking back over five years, performance data shows that the balanced RMI fund - named Global Markets 3 – has returned 26% over the last five years to 29 July.

This means £10,000 invested five years ago would now be worth £12,600.

This compares to the average fund in the comparable IA peer group – known as IA Mixed 20-60% Shares – that returned 11% over the same five-year period. This means the £10,000 investment used in our example would be worth just £11,100.

Will Hobbs, Chief Investment Officer at Barclays Wealth, explains why the long-term growth potential that stock markets offer means that it’s important to stay invested, even if the markets are a bit choppy and you’re worried that your investments are losing value.

He said: “This first half of this year was another challenging period for all investors, particularly those constrained to the biggest and most liquid markets on the planet.

“Behind the scenes of the RMI portfolios are many teams of highly focused specialists working to deliver all weather, inflation beating returns over the longer term. The longer-term performance of this Ready-made Investment range demonstrates more clearly the rewards of sticking with a well-diversified mix of investments. Remember, investing requires patience and periods of great fortitude.”

Hobbs added that no matter how worrying the short-term economic outlook, getting and staying fully invested remains “essential if you are going to enjoy the fruits of the global productivity surge potentially around the corner”.

He said: “If you can help it, don’t look too much. The teams of specialists are on the case.”

One of the certainties of investing is that stock markets will fluctuate. But by holding your nerve and staying invested, over time the markets should rebound, and the value of your investments will hopefully recover.

An investment loss is only a paper loss until you sell your holdings when that loss becomes realised.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

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