Where does 2008 stand in history?
FTSE All-Share nominal annual return since 1900 - What happened in the year following the previous four worst years for the UK market?
Source: London Business School, DataStream, Schroders. Updated as 26/11/08
If you are wondering how the investment markets may or may not recover you may find that history holds the key. Please view the chart above. In the last 108 years the 4 worst annual FTSE All -Share Index stock market falls occurred in 1931, 1973, 1974 & 2002. The years following those falls showed positive returns of between 30-40% in 1932, minus - 40/50% in 1974, over 50% positive gain in 1975 and over 50% positive gain in 2003''. In summary, of the 108 investment years 78 have shown positive returns and 30 have shown negative returns.
If your money is not invested then you cannot benefit from any recovery. Having said that it is important to maintain your investment balance. Negative market growth tends to lower a portfolios investment risk rating and potential return. A rising market tends to increase a portfolios investment risk making it more volatile. Investment portfolios should therefore be rebalanced on a regular basis. When was the last time your pension investments were rebalanced?
If some of the assets in your portfolio grow more quickly than others it can lead to an imbalance which will change the risk of your portfolio. For example where shares perform exceptionally well, the ‘shares’ element will gradually form a larger proportion of your portfolio making it more volatile and higher risk:
