LT Views Winter-2025-SINGLE-build08 - Flipbook - Page 11
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“Time in the market, not timing the market”,
remains an important part of investing
and is often considered the antidote to
volatility. More often than not, patient
investing overcomes short-term volatility
and is rewarded over the longer term. As
an example, if you had invested £10,000
in the FTSE All Share from January 1986
to July 2023, your investment would have
grown to be worth £243,168. However,
missing just the 10 best-performing days
during that near-40 year period would
have halved your investment return to just
£124,159.
Dominance of AI and mega caps
Since 2022, global investment markets have
been dominated by artificial intelligence
(AI) and mega cap stocks. As the previous
article explained, if we look at the S&P
500, a well-known index of US stocks, it
has a high concentration towards Apple,
Nvidia, Microsoft, Google, Amazon, Meta
and Tesla because of investor demand.
Indices like the S&P 500 are weighted by
size, not the real economy. In other words,
the growth of these mega cap stocks has
made the market more heavily skewed
towards AI and tech-related companies.
As markets have become more concentrated,
particularly the US, where mega techs are
driving the lion’s share of total market returns,
there’s a big risk of staying invested in these
‘crowded’ trades for too long. As a result,
we believe we’re moving into an era when
smart investors will shift their focus away from
now-expensive tech companies in favour of
more attractively valued companies that have
been overlooked recently.
Diversification is also important across
active and passive investments. Passive
investments have been incredibly popular
over the last 20 years and are available
across most asset classes. When looking
at passive funds, however, suitability is key.
We identify if the nature of an asset class
lends itself to passive investing.
We still think active managers have much to offer
investors, particularly in today’s more complex
market environment. This does vary from market
to market, with the UK, for example, historically
lending itself quite well to active management.
It features a high number of small and mid-cap
companies, and a broad and diverse number
of sectors – such as financials, energy and
consumer goods – meaning active managers
can discover inefficiencies that create good
investment opportunities.
LIONTRUST VIEWS – WINTER
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