Lindsell Train’s take 

I’ll finish with one last leftfield note. It involves what I think is a companion piece to the UBS report, namely a fab little paper by Lindsell Train portfolio manager James Bullock – whose work contributes to the Lindsell Train (LTI) investment trust – called A Very Long Hill.

Bullock makes what I believe is a crucial point that complements the conclusions reached in the UBS report: that time in the market is essential, as is adhering to long-term compounding returns. Bullock observes: ‘Most savers don’t (or can’t) stay fully invested, resulting in “time out of the market” and behavioural traps for those who “time the market”.’ The “gap” might not sound like much, but it costs the compounder greatly.’ 

As Brad Barber & Terrance Odean noted in an influential Journal of Finance paper on this topic: ‘Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading… Our central message is that trading can be hazardous to your wealth.’

Or, to put it simply, that massive compounding engine for equity returns suggested by the UBS report only really works if left uninterrupted.

David Stevenson