The key to successful investing isn’t predicting the future, it’s learning from the past and understanding the present. We present seven time-tested strategies for guiding portfolios towards tomorrow’s goals.
1 Plan on Living a Long Time – and Saving More for it
- People who are 65 today have a good chance of living to 80 or 90. But studies reveal many of us have not saved enough for our retirement years.
- Investors should start early, invest with discipline and have a plan for their future
- There is a 52% chance of one member of a 65-year old couple living at least another 25 years
2 Cash is Rarely King – Inflation Eats Away at Your Purchasing Power
- A risk-averse saver who decides to keep their savings in cash will no longer earn enough interest to beat inflation at today’s low interest rates.
- The purchasing power of cash left on the sidelines, or the amount of goods that your money can buy, could decrease by more than half over a 40-year time horizon if inflation is 2% per year.
3 Start Early, and Re-invest Income – Compounding Works Miracles
- Compounding is what happens when you earn returns not only on your initial investment, but also on any accumulated gains from prior years, allowing you to accelerate capital growth over time.
- The power of compounding is so great that delaying investing by even just a few years, or choosing not to re-invest income, can make an enormous difference to your eventual returns
4 Returns and risks generally go hand in hand – Be realistic about your objectives and what you can achieve
- The strongest- performing investments since the early 2000s have tended to be those whose prices have been most volatile. Equities, for example have suffered some sharp swings in value, but they have delivered relatively strong annual returns compared to cash left in the bank.
- Therefore, if you want to target a higher level of return, you have to be willing, and able, to tolerate larger swings in the value of your investments along the way
5 Volatility is Normal – Keep Your Head When all About you are Losing Theirs
- Plan on riding out volatile market periods. While the market’s ups and downs are hard to predict, sharp declines are a fact of life and should be expected.
- Despite suffering intra-year declines every calendar year since 1986, the equity market still recovered to deliver positive returns over two thirds of the time
6 Timing the Market is Difficult – Staying Invested Matters
- Selling after the market has experienced a large fall is normally the wrong strategy as investors can lock in losses and miss out on the subsequent recovery.
- While markets can always have a bad day, week, month or even a bad year, history suggests investors are much less likely to suffer losses over longer periods. It’s important to keep a long-term perspective
- Despite a tumultuous ride for investors over the past 10 years, our analysis shows that a diversified portfolio has provided a much smoother ride than investing in stocks alone.
- Throughout history, a diversified portfolio of stocks, bonds and other asset classes has helped to limit sharp swings in returns.
Source for all information: Guide to the Markets – UK. Data as at 31 December 2020.
The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions. For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as nonindependent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not a reliable indicator of current and future results. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy. This communication is issued by the following entities: In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be.; in Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only. For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.
Copyright 2021 JPMorgan Chase & Co. All rights reserved.