100% of the actively managed equity funds sold in the Netherlands failed to beat their benchmark over the last 5 years
86% of the actively managed equity funds in Europe failed to bear their benchmark over the last 10 years
98.9% of the US equity funds underperformed over the last 10 years
97% of the emerging market funds underperformed over the last 10 years
98% of the global equity funds underperformed over the last 10 years
Every year in the spring, I get post from the “Deutsche Rentenversicherung Bund”, providing information about my future state pension. What the letter says is scary.
First of all, it reminds me that I will have to work until 2037 (I will be 67 by then) to get my full pension. OK, I like working, but can I really trust the state that 2037 stays 2037, and doesn’t become 2040 (I will then be 70), or 2045 (I will then be 75)? Hardly, because there is still plenty of time for future governments to change the rules of the game until then.
And they will! The German population is stagnating, and getting older and older (the current median age is 47, i.e. 50% of the population is older than 47…). So there will be more pensioners, and fewer people in work. So the state won’t be able to keep its promise: pensions are paid by people in work, nobody else.
Employers, workers and governments are not prepared.
EMPEROR AUGUSTUS came to power with the help of a private army. So he was understandably keen to ensure the loyalty of his soldiers to the Roman state. His bright idea was to offer a pension for those in the army who had served for 16 years (later 20), equivalent in cash or land to 12 times their annual salary. As Mary Beard, a classical historian, explains in her history of Rome, “SPQR”, the promise was enormously expensive. All told, military wages and pensions absorbed half of all Rome’s tax revenues.
The emperor would not be the last to underestimate the burden of providing retirement benefits. Around the world a funding crisis for pension schemes is coming to the boil. Rahm Emanuel, Chicago’s mayor, is struggling to rescue the city’s pension plans; the municipal scheme is scheduled to run out of money within ten years. In Britain the pension problems of BHS scuppered attempts to save the high-street retailer; the same issue is complicating a rescue of Tata Steel’s British operations.
You probably don’t know, nor did we, so we have done the check.
The DAX started at 1000 points on 31 December 1987. It closed the year 2016 at 11481 points. That gives a compound average return of 8.8% per annum. Who is asking for more?
OK, we have also checked the annual performance in every single year since 1987. Here are the results, assuming that you would have hold the DAX for 10 years. This gives us a total of 20 investment periods (assuming that you would have invested on the 1 January of the period and sell on the 31 December at the period end).
Hi! My name is Black Belt 001. I am one of the founder of the MyMoneyWorks platform.
I am an average guy. Averagely good looking, averagely smart, with an average job, and an average house. It’s good to be realistic – most people believe that they are above average, for example that they “drive better than the average driver” (which is not the case: 90% of the population cannot be driving better than the average, statistically speaking).
So I am a normal guy. However, I believe that I have been a better investor than 90% of the German population in the last 10 years. And I guess that’s why you should continue reading.
Oh, and how do I know that?
Simple: less than 10% of Germans own shares, and I am one of them, and shares have performed pretty well over the period 2006-2015: +100% for my portfolio, with a mostly passive strategy (and I must admit: plenty of ups and downs). If I can do it, then anybody can do it. As long as you don’t make big mistakes, it is largely a ‘no-brainer’.
By the way, +100% over 10 years was no better nor no worse than the DAX, it was simply average, as I keep telling you! But I am happy being ‘average’, when 10-year returns are +100%. If you don’t believe me, then read the 10 years of holding the DAX post or check the 50-year DAX Return Triangle.
So I must have done better with my savings than the 90% of the Germans who left their money dormant. If you want to be above average yourself in the way that you manage your savings, then a good way to start is to read the ‘Faktbook Aktie’ in our next post: Deutschland, das Land der Aktienmuffel. Enjoy!
