Recent years have put trust in a low-cost diversified investment strategy to a tough test, and many of us started to be discouraged by the ‘annus horribilis’ of 2022, where the combination of rapidly rising interest rates and high stock valuations created the conditions for the worst performance since 1930.
So, 2023 started in a very uncertain manner, with a strong sense of instability compounded by unfavourable geopolitical dynamics. However, what happened in the markets was the result of a different narrative: 2023 has proven to be a winning year in terms of the performance of all asset classes, with a few exceptions.
In our exercise of strategic asset allocation, where we define expectations for future returns, it became clear at the end of last year that the immutable law of finance, which attributes higher future returns to lower entry prices, always plays in favour of the patient investor.
The investor who is willing to tolerate temporary negative fluctuations, in exchange for the opportunity to be invested in those few moments where the vast majority of positive returns concentrate – such as the last weeks of 2023 – notoriously manages to achieve the best result in the long run.
To quote Warren Buffet: “The stock market transfers wealth from the impatient to the patient.” From 2020 to now, we have seen this very clearly, even though the bond component will take a bit longer to recover from the losses of 2022.
Another certain thing is that markets look forward, not backwards; as soon as it became clearer that inflation could be contained and that this would lead central banks to reduce interest rates, especially stock markets regained confidence, returning close to the peaks of 2022.
Unfortunately, we humans often do the opposite; we tend to look back when we should strive to look forward. Looking back in January 2023 meant thinking we couldn’t recover from the red; looking forward allows us to continue imagining, without excessive optimism, higher expected returns in future years.
For Moneyfarm, 2023 has also been characterised by relentless work to expand our offering to become a ‘Total Wealth Manager’. We have always believed that offering simplicity and accessibility is key to fostering a winning wealth management experience that allows you to maximise the value of your assets with the peace of mind of having someone who acts in your interest independently.
Simplifying finance is difficult and requires a lot (a lot) of work, but we are pleased with how far we have come to be able to start offering a range of solutions that will help you manage wealth for different needs (such as Liquidity+), different interaction models (such as Share Investing), or express more idiosyncratic views (such as Thematic portfolios).
All this is always done in true Moneyfarm style, combining independent and cutting-edge investment strategies, cost advantages, an unmatched digital experience, and the constant support of our consultants.
Finally, as we often say internally, reiterating what Heraclitus taught us, that “change is the only constant,” we will also change our branding to better represent our new offering and the evolution of the company as a closer partner that invests together with you.
I close by sincerely thanking you for your trust, especially in these last years, and hoping that the last months of 2023 have allowed you to approach the the New Year with greater positivity, always looking forward, together with us.
Giovanni
Giovanni Daprà, Co-Founder and Chief Executive Officer: Giovanni believes in the idea that a better customer experience comes from technology and finance working together. He co-founded Moneyfarm with this principle to deliver the best solutions to protect and increase an individual’s wealth over time. Prior to Moneyfarm, he worked at Deutsche Bank AG. Giovanni graduated from Bocconi University with a degree in Finance and has an MSc in Mathematical Trading and Finance from Cass Business School.
Disclaimer: As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future performance. The views expressed here should not be taken as a recommendation, advice or forecast.
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.
