Ignore the noise

Some clients say: “I’m not interested in the details. I trust you.” (If that’s you, you don’t have to keep reading.)

Others like to monitor their investments regularly so they feel confident in our advice. (This is one of the reasons we keep you informed with our regular articles.)

If that’s you, here’s the latest from the world of investing.

What’s going on in the markets?

Looking back at 2018, the market looks quite noisy, with lots of ups and downs.


At times like this, you may well ask: “Is there a better way to invest when the markets are rocky?” (In short, the answer is “No.”)

When you put it into a longer perspective, the picture is not quite so bad. For example, here’s the past four years.

2014 to 2018

Even four years is a short timescale in the scheme of things.

Gerard O’Reilly is co-CEO and Chief Executive of Dimensional. He says: “From day to day, prices can and do change in unpredictable ways. The amount of noise in the data is related to the magnitude of the price swings… The more noise in the data, the weaker the inferences investors can make using the data”.

What that means to you

When looking at historic investment data, there isn’t an ideal timespan for analysis, but you can make more reliable inferences from 240 months than you can from 12. In fact, Gerard says 15 to 20 years is just “a good starting point” and recommends looking back even longer.

Understanding volatility is key to becoming a long-term investor.

Gerard O’Reilly

As long as you’re not overdrawing from your fund, you can accept volatility and live with returns both when they disappear and when they’re strong.

So why do we bother sending you regular updates? Because understanding short-term performance helps investors set volatility expectations – which means fewer surprises and more chance of staying disciplined and sticking to the plan.

We hammer this message home regularly. You simply have to stay focused on the long-term game.

Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100