While investors with a short time horizon may want to avoid volatility as much as they can, and quite rightly sit in the low-volatility, low-return funds, others can afford to ride out market volatility and reap the future rewards, Baillie Gifford marketing and distribution director James Budden says.
“The problem comes when investors with long-term horizons end up in low-volatility products.
“This can lead to a misalignment of interests and can occur when advisers are nervous of their clients’ investment performance in the short term.
“They end up sacrificing returns as a result.”
The problem is the industry itself tends to narrowly focus on the immediate future, on quarterly and annual figures with markets “incentivised” to be short term, Morningstar’s Mike Coops adds.
The reality is there actually was more to fear than fear itself back in 1933 when US President Franklin D Roosevelt first coined the famous phrase during his inauguration speech.
Even in the depths of the Great Depression, FDR managed to remain optimistic.
In the current period of underlying economic strength, perhaps its time more long-term investors did the same now.
