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This investment represents an almost quadruple gain on the original amount, it is worth remembering that the equity market has suffered two major downfalls during this time: 1987 and again from 2000. The market downturn of 2000 in particular represented one of the largest and longest market falls in recent history. As a result, there is actually very little difference between the value of the investment before the dip and now, after it. By 1999, that £100 had reached a value of £363, but then fell back and struggled as markets remained weak through to 2003. Since then, the investment has regained its ground, but only just.
An investor would have lost £1 if they had withdrawn the money from the market in 1999 rather than waiting till 2006, a small price to pay for the problems of the following years. However, had the money been withdrawn in 2000, then it would have been worth £216, £148 less than in 2006 and £147 less than in 1999. Sadly, no one can accurately predict these kinds of market movement in advance – if they could, we would all be millionaires.
This is therefore a stark reminder of the risk of investing in equities - but, conversely, it does also show the benefits. For a start, even at its worst point, in 2002, the investment would still have been worth twice its original value. In fact, at no annually monitored point during this particular 20 year time frame has the money fallen below its original value. Of course, this has not always been the case over every 20 year period and if you had actually invested in 1999, the falls of 2000 through 2003 would have seemed devastating. After more than six years, you might only just be back to par.
This is why the adage of equity investment should always be considered only for ‘long term savings.’ The longer the time frame, the better the end result as dips tend to recover – it just takes a little time.
Contact Steve at Radcliffe and Newlands and he'll be happy sit down and discuss all your investment needs.
Steve Weisner Independent Financial Adviser Radcliffe & Newlands 5th Floor Crystal Gate 28-30 Worship Street London EC2A 2AH Email: sweisner@rad-new.com Tel : 020 7382 0437 Fax : 020 73740462
