Wealth Management

12 Days of Christmas: Two Turtle Doves

On the second day of Christmas my true love sent to me, two turtle doves. We mark Day 2 of the 12 Days of Christmas, with the caring, canoodling doves and how long term commitment to certain investments may not always be recommended.

12 Days of Christmas: Two Turtle Doves

Turtle Doves are a often thought of as a symbol of love, friendship and devotion. They stay together for a lifetime, which is part of the reason they are considered a sign of loyalty and love. Showing the same degree of long term commitment and loyalty to your investments may not always be recommended.

As markets move each year, sticking to an asset class or fund in particular may prove costly if you remain too rigid in your loyalty to them. The top-performing asset class so far in 2020 is in fact gold, with a return more than four times that of U.S. bonds. On the other hand, real estate investment trusts (REITs) have been the worst-performing investments. Needless to say, economic shutdowns due to COVID-19 have had a devastating effect on commercial real estate.

Since around 1985 up until today, the order of asset classes becomes fairly random as they move up and down the ranks of best and worst performing. For example, emerging market stocks plummeted to last place amid the global financial crisis in 2008, only to rise to the top the following year in 2009. In 2017, international bonds were near the bottom but then managed to rise to the top during the 2018 market selloff. There are also large swings in the returns investors can expect in any given year. While the best-performing asset class returned just 1% in 2018, it returned a whopping 71.5% in 2009.

However had you held Apple shares in 2000 you might have been tempted to offload them once the share price had fallen by almost 75% and the shares closed that year at below 27 cents. This would have been a mistake as Apple shares climbed to a massive $131 in September 2020. Sometimes showing the loyalty of a turtle dove can pay off. If you had held onto your $10,000 investment in Apple shares in December 2000 that same investment would have climbed to a staggering $4.8m in September 2002.

Rosecut are here to help remove the headache with deciding on which stocks and asset classes to invest into, with an investment strategy that is flexible and develops over time based on your attitude to taking risk and personal life goals.

The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies.

If you would like to read the previous article for the first day of the '12 Days of Christmas: A Partridge in a Pear Tree' please click here.