We often use the “smartie box” graph to illustrate the unpredictability of returns. In the short term, returns can seem random. The best performing asset classes in one year often drop to become one of the worst performing asset classes the following year. Our intention in using it is to show the importance of staying invested and having a long-term view. It highlights the importance of diversification because you don’t know where you are going to get your returns from each year.
What I like about this graph is that it shows long-term average returns (over a 5-, 10- and 15-year period). These period frames allow you to see a much more predictable pattern.
Looking at the graph we can see that over the long-term Global Equities offered the best annualised returns, despite being the worst performing asset class this year. Balanced funds also offered good consistent returns. Long-term investors have been rewarded for staying invested.
Interestingly SA/Local Equity offered much lower annualised returns over the same periods relative to Global Equities. If we look at the last 100 years of Local Equity returns, the long-term average return is closer to 13% per annum. This may indicate that Local Equity investments are undervalued and need to catch up to long-term returns at some point.
Now You Are Free is a touching short film about 86-year-old Jenny, an octogenarian who will change any preconceived ideas you may have about ageing. She believes the word “retirement” is deadly, one that is often associated with the end of life. But in her view, she sees it as the beginning of life because you are now free. You are free to try new things and she encourages you to be more proactive than ever before. It is a freedom that opens parts of yourself that have shut down – most likely due to work responsibilities, children, and other life necessities.
We can all learn from Jenny no matter our age. If you are in the later part of your life, she may inspire you to try things you have always wanted to. If you are young, she may inspire you to live your life more consciously.
As Jenny says, “We cannot escape death. What we can do is live our lives as fully as possible. Life is for living.”
In all our retirement workshops we aim to convey a similar message. We want people to live the best lives they can, no matter their age. Good financial planning can make this possible.
Green Renaissance is a channel on YouTube that dedicates it’s time to capturing beautiful and meaningful stories just like this one. Warning! You may find yourself lost in these stories.
What is Longtermism?
It’s a philosophical perspective which gives priority to improving the long-term future. We live in a time where carbon emissions are rising, advanced artificial intelligence is being developed and advances in biotechnology include the capability to engineer viruses more deadly than any natural disease. These are events that may occur now, but their impact could affect untold numbers of future generations. Longtermism encourages us to think about the future and to act with care.
William MacAskill is an associate professor in philosophy at the University of Oxford. At the time of his appointment, he was the youngest associate professor of philosophy in the world. He has written a new book that is getting a lot of attention globally, its call What We Owe The Future.
In this book, MacAskill makes a strong case for Longtermism. He believes we have a profound responsibility to help protect future generations and that our actions today can steer the future into a better trajectory.
One of the reasons the book is getting a lot of attention is because many argue that we must focus on the present instead. This is debated in the Sam Harris podcast referenced below. Some argue that if we cannot provide a better life for people who live in poverty, unsafe, unfair, and war-stricken countries today, how can we even being to worry about future generations? MacAskill argues that these things are linked and that focusing on the future will also have a positive impact on the present.
I think it’s important to read different perspectives. It might open you up to new ideas or help you see your own biases and blind spots. Even if you don’t agree with MacAskill, he shines a light on important issues that require our urgent and careful attention.
P.S if you don’t feel like reading, there are a few podcasts that hosted MacAskill this month that you can listen to instead:
I hope you enjoyed this month’s edition.