Even long term outperformers suffer years of underperformance

81% of companies that outperformed the US stock market in the last 10 years went through a period of underperformance lasting at least five years.

Just as striking, 41% underperformed for at least nine years.


The pattern is almost identical if we look at data to the end of 2021 (2022 has seen quite a reversal in many trends), or if we look at companies that outperformed over the past five years rather than ten. Or if we look at the UK market rather than the US.

You could argue this is overly simplistic. The job of an active asset manager is to adjust their exposure based on the relative appeal of different stocks, which varies over time. And, as the market cycle shifts, the basket of stocks that you might want to hold will change. It’s not a case of picking a portfolio and logging off for five to ten years.

But that doesn’t invalidate the overall point here. Which is that, if you want to outperform over the long run, you will almost certainly have to go through periods when performance is less good. Staying the course isn’t easy. It tries your conviction. But judging performance over short horizons, and making investment decisions on that basis, could mean missing out on long term gains.


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Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested.


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The forecasts stated in the document are the result of statistical modelling, based on a number of assumptions. Forecasts are subject to a high level of uncertainty regarding future economic and market factors that may affect actual future performance. The forecasts are provided to you for information purposes as at today’s date. Our assumptions may change materially with changes in underlying assumptions that may occur, among other things, as economic and market conditions change. We assume no obligation to provide you with updates or changes to this data as assumptions, economic and market conditions, models or other matters change.