Markets Work

sydney investment advice

Traditional active investment managers strive to beat the market – they rarely succeed. Studies have shown less than 10% of active investment managers consistently outperform the market and when their fees are taken into account that figure falls to less than 1%.

Markets throughout the world have a history of rewarding investors for the capital they provide. Allocating funds to the sections of a market that offer long-term risk and return characteristics is shown to be the most successful way to capture market returns.

So the question is: why continually try and outwit the market when it exists to work for you?

This chart compares the returns delivered by the US share market over a 20-year period, against the returns of the average equity investor.

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As you can see, there’s a significant difference between market returns and what the average investor achieves. And there are pointed reasons why the average investor continues to deny themselves those higher market returns:

  • Paying high fees
  • Focusing on pre-tax returns
  • Trying to time the market
  • Failing to diversify
  • Chasing last year’s winner

116 years of Australian share market returns illustrate if an investor picks and sticks with a strategy that works with the market, their patience will be rewarded.

ASX returns history

At Blue Diamond Financial we work with the market and focus on what we can control.

Next: Risk & Reward…