Looking forward to the long term

It's been over a year since the pandemic started and it's no understatement that it's been a difficult time for us all. Lives and livelihoods have both been lost.

Stock markets have told a different story. Sharp drops at the start of the outbreak have been followed by surprising climbs. Despite economic shocks, some markets have reached all-time highs.

Curious, since we know we're not out of the woods just yet. There are still some very real struggles right now, and challenges ahead. Questions have been raised about potential new variants, vaccine supply struggles and about further lockdown restrictions across a range of countries.

Looking past the pandemic

England is set to have all restrictions lifted on 21 June. Stock markets have seen renewed interest, and companies that rely heavily on a strong economy have seen their shares lifted.

As we emerge out of lockdowns, the light at the end of the tunnel seems to be getting that little bit brighter. But in the world of investments, some lights are shining brighter than others.

The UK and Japan remain relatively undervalued, while the US has continued to explode. Now more than ever, it's important to not jump the gun and follow the crowd.

This Investment Times looks at past trends that we can learn from today. Of course, history doesn't always repeat itself, but we'd be silly not to look at mistakes or lessons from the past to make sure we don't repeat them.

3 investment lessons the pandemic has taught us

It's a good time to make sure your investments are in good health and you have a diversified portfolio that you're willing to hold for the long term. Hopefully this issue will help you do just that.

The global picture

Future growth prospects are on the up. Most economies are now predicted to recover to pre-virus output levels by the end of 2022. So far over one billion vaccine doses have also been injected around the globe, with countries like the UK making great progress.

The first table below shows the average fund performance across the major sectors for the last five years (1 April-31 March). The second shows the maximum loss we'd have seen if we'd invested on 1 April, each year, over the last five years.

Average fund performance across the major sectors, for the last 5 years (%)

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Past performance isn't a guide to the future. Source: Lipper IM, to 31/03/21. IA sector averages.

• View the performance table in text format

  Scroll across to see the full table.

  2016-17		2017-18		2018-19		2019-20		2020-21
  Global Emerging Markets	36.71%	Japan	8.89%	North America	15.73%	UK Government Bonds	10.59%	Asia Pacific (ex Japan)	47.91%
  Asia Pacific (ex Japan)	35.41%	Global Emerging Markets	8.82%	Global	8.77%	Global Bonds	1.55%	Global Emerging Markets	47.63%
  North America	34.55%	Asia Pacific (ex Japan)	6.52%	Asia Pacific (ex Japan)	3.88%	UK Corporate Bonds	0.78%	North America	42.77%
  Japan	32.55%	Europe (ex UK)	5.77%	UK Government Bonds	3.51%	North America	-3.60%	Global	40.41%
  Global	29.24%	Global	2.86%	Global Bonds	3.28%	Japan	-4.30%	Europe (ex UK)	39.58%
  Europe (ex UK)	24.05%	UK All Companies	2.76%	UK Corporate Bonds	2.98%	Global	-5.60%	UK All Companies	37.94%
  UK All Companies	18.14%	UK Corporate Bonds	1.68%	UK All Companies	2.89%	Europe (ex UK)	-9.08%	Japan	31.59%
  Global Bonds	9.65%	UK Government Bonds	0.23%	Global Emerging Markets	-0.79%	Asia Pacific (ex Japan)	-11.10%	UK Corporate Bonds	9.15%
  UK Corporate Bonds	9.50%	North America	-0.33%	Europe (ex UK)	-1.66%	Global Emerging Markets	-14.58%	Global Bonds	5.22%
  UK Government Bonds	7.38%	Global Bonds	-0.94%	Japan	-3.65%	UK All Companies	-19.22%	UK Government Bonds	-5.92%

  Past performance isn't a guide to the future. Source: Lipper IM, to 31/03/21. IA sector averages.

Maximum losses across the major sectors (%)

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Past performance isn't a guide to the future. Source: Lipper IM, to 31/03/21. Figures show data from 1 April to 31 March for each period. Figures for 0.00 mean the sector did not fall to a loss at any time over the period in question.

• View the performance table in text format

  Scroll across to see the full table.

  2016-17		2017-18		2018-19		2019-20		2020-21
  UK Corporate Bond	0.00%	UK Corporate Bond	0.00%	Global Bond	-0.71%	Global Bond	-0.34%	UK Corporate Bond	0.00%
  Global Bond	-0.85%	UK All Companies	-0.55%	North America	-0.74%	UK Government Bond	-2.19%	Global Bond	-0.23%
  UK Government Bond	-1.85%	Global Bond	-1.57%	UK Corporate Bond	-1.54%	UK Corporate Bond	-3.61%	Asia Pacific (Ex Japan)	-1.35%
  North America	-2.07%	Europe (Ex UK)	-2.72%	Global	-2.24%	North America	-11.10%	Global Emerging Markets	-2.18%
  Global	-2.20%	Global	-2.94%	UK Government Bond	-3.80%	Global	-12.05%	Europe (Ex UK)	-2.77%
  Japan	-3.08%	Japan	-3.10%	UK All Companies	-7.12%	Asia Pacific (Ex Japan)	-15.20%	Global	-3.87%
  Europe (Ex UK)	-3.61%	Global Emerging Markets	-3.20%	Asia Pacific (Ex Japan)	-8.51%	Japan	-15.27%	UK All Companies	-4.31%
  UK All Companies	-5.29%	Asia Pacific (Ex Japan)	-3.67%	Japan	-8.97%	Global Emerging Markets	-17.34%	Japan	-4.43%
  Asia Pacific (Ex Japan)	-5.53%	UK Government Bond	-3.80%	Europe (Ex UK)	-9.37%	Europe (Ex UK)	-19.60%	North America	-5.01%
  Global Emerging Markets	-6.12%	North America	-4.28%	Global Emerging Markets	-12.08%	UK All Companies	-28.95%	UK Government Bond	-6.84%

  Past performance isn't a guide to the future. Source: Lipper IM, to 31/03/21. Figures show data from 1 April to 31 March for each period. Figures for 0.00 mean the sector did not fall to a loss at any time over the period in question.

These tables highlight how investing can be a bumpy ride. No one knows what sectors will lose the least or gain the most. It's also a good reminder that volatility is normal. If we react and sell when we see these situations, we'll crystallise our losses, when in fact the market might very well improve.

Taking bonds as an example. The max loss looks relatively stable, which would give you a smoother ride. But this has been at the cost of what growth other sectors have offered.

No one sector has consistently owned the top spots. And if you'd only invested in one or two sectors, you might well have seen concerning losses.

Taking the US and UK sectors as an example. If you invested half in each, your losses would've looked greater than if you had invested equally in all ten sectors below. By spreading your money, your investment journey would've been smoother.

As investors we shouldn't rely on picking one or two investments in the hope that they gain more than the wider market or lose less. We should be thinking more widely. Own lots of different investments across different sectors and parts of the world. That way you won't mind seeing colourful charts like these showing your gains and losses – over the long term you'll likely be in a better position.

There are two key points investors can take from all this. It pays to be patient, and own lots of different types of investments across different places and sectors.

Past performance isn't a guide to the future. Remember, all investments rise and fall in value, so you could get back less than you invest.