If you've ever looked into investment products, you will probably have come across the phrase "past performance is not a reliable guide to future performance". Sound advice, and all too true! 👍
It's therefore ironic that for those of us who aren’t experts in wealth management, historic fund performance is one of the few metrics that we can actually base our decisions on! Even though we logically know that what happened last year bears absolutely no impact on what will happen this time around. 🤯 Quite obviously, what matters most to us is how our investments will perform in the future. But it is also in our nature to look back… at how our investments have performed in the past! 👀 And how much better-off we might be if we'd started our investing journey 10 years ago.
Here at Plum we're not just investing for today or tomorrow. In fact, we don't really think about where an investment will be one year from now. We think in decades, not days. 📆 We think about investments as a way to try to minimise risk over the long term, and certainly not as a way to generate short term profits! In the words of Warren Buffet (widely considered to be one of the most successful investors of all time), "The stock market is designed to transfer money from the active to the patient." ⏳ We like to think we're patient.
So, let's take a look and see how our investments have performed! 📊
When making investment decisions, one of the most important things to consider is when you'll need that money you're investing back. 🤔 The longer you can leave your money in an investment, the more time you have to take advantage of compounding (the principle by which any earnings are reinvested—i.e. so you can then generate earnings on earnings!), and reap the potential returns from that investment. 💰
A useful way to think about this is that the stock market is like a voting machine in the short-term, and a weighing machine in the long-term. This means that day-to-day, trading can be considered something of a popularity contest (with a tendency for ‘hive mind’ 🐝), but good companies operate in the knowledge that they will one day be weighed (and so will focus on getting as heavy as possible). Which takes time! ⏱
Ultimately though, the single most important thing when it comes to investing is that you settle on a strategy that matches your own personal appetite for risk over a time-period that works for you! Whatever your strategy… we hope you'll join us 👨👩👧👦
If you would like to know more about investing through Plum, then you can check out our website here.
Remember, your capital is at risk if you invest and past performance is not a reliable guide to future performance.