Note to investors – check the six year numbers not just the five

24th October 2013


We are now past most of the significant five year anniversaries for the dawn of the credit crunch and the Great Recession as the last half decade or so has come to be known writes John Lappin.

We may even – dare we say it – be at escape velocity economically, though it’s not exactly a ‘shoot the lights out’ recovery except perhaps in the South East housing market.

The bulls are even predicting the FTSE 100 will beat its all time high of 6933.87 by Christmas. Don’t bet the farm on it, but they may be right.

There is the small matter of the exit from Quantitative Easing. Some long term side effects of the ‘cure’ have surely yet to be felt as well as the short term punishment for British savers and retirees who took out annuities.

However, for a lot of people, the crunch may start to feel like part of history. You personally may date the crisis to Lehman Brothers, now approaching five years and one month ago or to the UK bailouts of HBoS and RBS which came shortly after.

You may prefer those slightly earlier canaries in the cage, the collapse and takeover of Bear Stearns or even Northern Rock which dates to more than six years ago.

Yet perhaps the important date for investors is the pre-crisis high when the market hit 6,732.4 in June 2007 and did not see that level again until May this year.

Your fund manager, discretionary manager and perhaps your financial adviser will increasingly be furnishing you with five year numbers. This is not some sort of sleight of hand, rather it is industry practice. Look on Yahoo Finance. It is easy to get a five year view, less so six. So maybe you should ask for six.

At Mindful Money, we wouldn’t argue that you should necessarily expect any investment professional to demonstrate amazing numbers through 2007 and 2008.

Different managers suffered in different ways, partly depending on style as much as anything else. Most suffered a huge degree of pain though so, of course, did their investors.

But it doesn’t hurt to ask how your investments did or indeed how your prospective investments would have done, when it looked as if the world, the economy and almost all asset classes, long standing  investment theories and your hard won money looked as the preferred mode of travel was a hand cart and the destination was hell.

So six year numbers may tell you a lot more than five. And if your fund manager did really, really badly, maybe it is fair enough at least to ask her or she what have you learned?

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