The Press and Journal (Inverness, Highlands, and Islands)
Benefits of long-term investing clear in spite of short-term falls
New data from the Association of Investment Companies (AIC) has highlighted the benefits of long-term investing despite the recent market falls.
Six investment firms would have made investors millionaires if they had invested their annual individual savings account (Isa) allowance in the same company each year to the end of February 2020.
Investing the full Isa allowance each year from 1999 to 2019, a total of £226,560, into any of Scottish Mortgage, HgCapital, BlackRock Smaller Companies (BSC), Biotech Growth, BlackRock Throgmorton or TR Property and reinvesting dividends would have produced a tax-free pot worth more than £1 million, AIC said.
A further seven investment companies would have returned in excess of £900,000, more than trebling investors’ total investment.
AIC said that of the 20 investment companies with the highest returns, seven were “in the UK smaller companies sector”.
AIC communications director Annabel BrodieSmith said: “The fact that six investment companies have generated more than a million pounds for those who invested the full Isa limit is a testament to the power of the investment company structure.
“While it’s interesting to see which investment companies would have made investors Isa millionaires, it’s really important to have a balanced portfolio.
“If investors need guidance on their Isa choices they should speak to a financial adviser.”
Scottish Mortgage corporate strategy director
Catharine Flood said: “In an ever more impatient world, we remain resolutely long-term.
“Scottish Mortgage aims to buy and hold great growth businesses that have the potential to be among the few outstanding companies which create the lion’s share of long-term equity market returns, through the power of compounding. Crucial to this is a willingness to endure through the inevitable volatility in stock markets along the way.
BSC portfolio manager Roland Arnold said: “We try to identify companies with good long-term growth prospects over the next five to 10 years – those with earnings momentum resulting from their market position or pricing power.
“Longer-term, the earnings growth of these companies will compensate investors for any shorterterm headwinds.”