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Good is not good enough for us

Patience is a lack of virtue for most people (even if you may see it differently yourself). Especially in value investing, patience is one of the keys to success. Because let's be honest: wouldn't you lose your belief in success if, after five years of negative performance, you were still told that things would get better?

But: If you had invested EUR 100,000 in the MSCI World Index (in EUR) 40 years ago, you would now have over EUR 660,000 in your account (purely nominal, without inflation).

You often hear the argument that you don’t need an asset manager, because some indices would be better than asset managers anyway and you should therefore buy index funds yourself at low fees. But don’t be misled. What if you had entered the MSCI World Index 20 years ago instead of 40 years ago? The average annual return would then be around 2%. That’s less than inflation. The investment method “under the mattress” would have been the better choice. Isn’t that absurd?

 

MSCI World Index

Grafik von Kurschwankungen

Back then, 20 years ago, a bubble has developed in the markets and the indices (and the stocks contained therein) were overpriced. Two simple but important insights can be derived from this:

  1. Those who stay with it long enough win. After all, those who remain calm even after the long, almost painful period of negative performance will ultimately be rewarded with a positive annual return.
  2. An index usually performs good on a long-term average. But good is not good enough for us. We select the pearls from the index and only invest in companies that we consider to be particularly attractive. We filter out the bad, medium-priced or overpriced companies and invest strategically in the strong, low-priced or fair-valued companies. This guarantees an excess return. However, this requires a lot of experience, skill and patience to find the pearls.

We can prove the success. That’s why our three sample portfolios stand out clearly from the benchmark indices:

Our conclusion: exercise patience, it will pay off. Below you can see the sample portfolios compared to the benchmarks.

 

Sample Portfolio Value 100

 

Value 100 vs. Benchmark

Sample Portfolio Value 60

 

Value 60 vs. Benchmark

Sample Portfolio Value 30

 

Value 30 vs. Benchmark

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