Next gen of investors puts past in perspective

The release of Credit Suisse’s latest Global Investment Returns Yearbook has drawn comparisons between more mature investors at the height of the late 20^th century and what the next generation can expect to face in the future.

Tom Stevenson, Investment Director at Fidelity International, said the report reflects the sentiment of investors “passing the baton” onto the next generation and shows how seeing the market environment “through their fresh eyes” can the past three decades into perspective.

“It is natural to wonder how their experience of the markets will compare with your own,” he said.

“So, when my children complain that we have had it easy, I’d counter that it’s not quite so black and white. Yes, we enjoyed the equity market’s golden period in the 1980s and 1990s (and as for housing, well that’s another story).

“But the first two decades of the 21st century have been more of a challenge. Two bear markets in which shares have halved, a global financial crisis and a pandemic gave us something to think about along the way.”

Stevenson said the yearbook’s authors, Professor Paul Marsh, Professor Elroy Dimson and Dr Mike Staunton, signalled younger investors can expect to enjoy slightly lower returns than their parents did and significantly less than their grandparents did in the 1950s and 1960s.

“The difference between the 6.7pc inflation-adjusted return from shares since 1950 and the 4pc predicted from here may not sound enormous but compounded up over a lifetime of investing, it will make a big difference,” he said.

“The fact is that the stars were aligned in the second half of the 20th century as far as investors were concerned. Just as the first half of that turbulent century was far more catastrophic than anyone might have predicted in 1900, the second 50 years were far better than would have seemed possible as our young parents picked through the wreckage of two world wars and a Depression.

“I’m reminded of the serenity prayer: accept what you can’t change and focus courageously on what you can … at least the Millennials and Gen Z-ers in my family are doing the right thing: starting earlier than I did, saving what they can, taking sensible risks, diversifying away their mistakes and sticking at it.”