Less than three months later, on 21 November, you would have lost a whopping 56 per cent of your bet. Is it in fact possible to imagine poorer timing? If you had put the money in the bank instead, you would have appeared as a clairvoyant genius.
And yet: If indeed you had invested in the Norwegian stock market just before the crash and stayed the course for ten years, you would have doubled your bet. This corresponds to an annual average return of 7.5 per cent, which is hardly a poor reward for lousy timing. Who's the loser now?
The end result is of course not independent of how you invested in Norwegian shares. If you had chosen one of our Norwegian mutual funds, you would have come out even better – up to 11.3 per cent in the Pareto Investment Fund.
If instead you had chosen the global stock market, you would in fact have tripled your money and then some. In this case, the average return would have increased to 11.9 per cent. And again, our unitholders would have reaped a premium. Pareto Global D is on record with a 13.1 per cent annual average return, so that NOK 100 would have grown to NOK 342.
“This corresponds to an annual average return of 7.5 per cent, which is hardly a poor reward for lousy timing.”
Hindsight? Not really. This is all about the functioning of the market. About the fact that, sooner or later, you will make a profit on your stocks and equity funds as long as the companies in the portfolio keep making money. About the fact that capitalists make money – at least in the long run. And that patient endurance pays off.
Honestly: If you had quit the stock market in 2008, when would you have had the guts to go back in?
The article is an excerpt from our 2018 Annual report.
Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager's skill, the fund's risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments.