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Lost decades in equities “are always followed by positive decades”


Every rolling decade of negative equity returns has been followed by a decade with positive average annual returns, according to an analysis of the Barclays Equity-Gilt Study by Fidelit

Every rolling decade of negative equity returns has been followed by a decade with positive average annual returns, according to an analysis of the Barclays Equity-Gilt Study by Fidelity International.

Since 1899, 17 ‘lost’ decades saw an average annual return of -2.9 per cent. The decades following each of the first 16 lost decades have averaged 10.8 per cent a year.

The latest Barclays Study shows that UK equities have suffered average annual returns of -1.5 per cent in the decade to the end of 2008 – far from the worst decade on record.

The study, a benchmark analysis of asset class returns, shows that since 1899 there have been 17 rolling decades of negative equity returns.

The first was 1906-1915 (average annual total return of -0.2 per cent), which was followed by eight consecutive decades of negative returns, the last being 1914-1923 (-1.3 per cent).

The next was 1965-1974 (-6.0 per cent), which was followed by several lost decades, the last being 1973-1982 (-1.2 per cent).

The average annual total returns in all of these decades were -2.9 per cent. However, each of the decades immediately following a decade of losses has provided positive average annual total returns.

In 1916-1925 average annual total returns were 3.9 per cent; 1924-1933 returned 9.6 per cent; 1975-1984 returned 17.4 per cent; and 1983-1992 returned 12.7 per cent.

The average annual total return across all 16 good decades was 10.8 per cent.

Rob Fisher, head of UK personal investments at Fidelity International, says: "Markets recover from losses, even big ones. This analysis shows not only that equities have underperformed for a ten year period before but also that the decade immediately afterwards is when we see many instances of handsome returns.

"My suggestion right now to nervous investors would be to consider their long term goals, make best use of tax efficient savings plans such as ISAs, and remember that history has shown again and again that time can reward the patient investor."

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