Equity funds are designed for long-term savings and capital development - not for short-term speculation. As a saver in equity funds you will experience large and small falls in prices – that’s part of the dynamism. Although the downswings are unpleasant, it is at the same time important to remember that it is exactly the downswings that mean you can expect to receive an extra return on equity funds over time - compared to, for example, bank savings. Some people even call falls in share prices the equity fund saver’s best friend.
What goes down, must …
Share price falls have one thing in
common – sooner or later they are followed by upswings. In the past, the
upswings have been both longer and stronger than the downswings. Are you one
of those who alleges it is possible to foresee the stock exchanges’ many
turning points? Do you try to sell units when the market has almost peaked
and buy units when the market has almost bottomed out? Unfortunately, the
norm is for most people, both professionals and amateurs, to miss the mark
far more often than they hit it. Only those who choose to be invested in the
long term, without jumping in and out, are guaranteed to benefit from all
the upswings.
As an equity fund manager, we make long-term investments. This is why we also advise the unit holders in our equity funds to invest for the long term. Because it is exactly through taking a long-term view that we manage to achieve good returns.
The long-term view in ODIN’s equity funds
The table on the
right shows the value of making long-term investments in ODIN’s equity funds
compared to saving in the bank. We have looked at the return you would have
received if you had saved for five and 10 years respectively in those of
ODIN’s equity funds that have been in existence for at least 10 years. In
ODIN Norden, all the savings periods of more than five years have on average
produced an annual return of 19.33 per cent (lump sum investment, monthly
calculations). This produces an annual additional return compared to
traditional bank savings (represented here by the 3-month NIBOR rate) of all
of 13.5 per cent. The other equity funds in the table have also produced
good results in the past.
In the table at the bottom, we continue to investigate the figures. ODIN Norden, which was established in June 1990, could refer to a total of 161 five-year savings periods at the end of September. Of these, 147 have produced a positive return, while only 14 have produced a negative return. If we compare this to corresponding bank savings, you would in 136 out of 161 cases have achieved a better return by saving in the ODIN Norden equity fund instead of in the bank. If we raise our heads and look at longer periods, we can see that no 10-year savings periods in ODIN Norden have produced a negative return. In addition, we can see that ODIN Norden has always produced a better return than corresponding bank savings!
The tables can be summed up as follows: the longer you save in equity funds, the more likely it is that you will receive a positive return on your savings. The longer you save in equity funds, the more likely it is that you will obtain a higher return than if you saved in the bank. And last but not least: the longer you save for, the less short-term fluctuations affect your long-term return.
