Last year, global equity investors were largely rewarded, with US shares up approximately 18%, NZ shares up around 6%, and the MSCI World Index up approximately 21%. Those who stayed disciplined despite media noise and negative sentiment benefitted from maintaining a long-term focus.
Any patient investor could have earnt meaningful returns however, some investors have chosen to pay the higher premium with a hope to receive larger returns than the market average. So, did this play out as hoped? Did paying a higher premium result in larger returns?
The latest SPIVA New Zealand Year End Data (S&P Indices vs Active Managers) compared professional active fund managers against the broader market over time, and the what it stars for results were eye-opening.
Over the last year alone:
· 74% of active New Zealand Global Equity fund managers underperformed the market
· 65% of active New Zealand equity fund managers underperformed
· 79% of active bond fund managers underperformed their benchmark
The longer-term numbers were even more striking. Over a 10-15 year period, the vast majority of active fund managers failed to consistently outperform after fees were taken into account.
Why Consistency Matters
That might sound surprising. After all, these are full-time investment professionals researching companies and making decisions every day.
But the reality is that markets are incredibly difficult to predict consistently. We find a more appropriate view is to accept that prices are fair and accurate (at FoxPlan we promote passive investment managers).
Some managers will have strong years. Others will lag behind. The challenge isn’t finding someone who can outperform temporarily - it’s finding someone who can do it consistently over decades, which the data shows is very rare.
Focusing On What You Can Control
For everyday investors, this is an important reminder that successful investing usually isn’t about trying to outsmart the market or constantly make changes.
More often, strong long-term results come from focusing on the things you can control:
· Having a clear long-term plan
· Accepting that prices are fair and companies are valued by the market
· Staying invested through market ups and downs
· Diversifying investments
· Choosing passive styled strategies supported by evidence (FoxPlan practice)
· Avoiding emotional decisions when markets become uncertain
· Reducing investment fees (passive investment management fees are less than active fund mangers in general)
Markets will always move around. Headlines will always change. But history shows that disciplined, long-term investing tends to outperform reactive decision-making over time.
The FoxPlan Approach
At FoxPlan, we believe investing doesn’t need to be complicated to be effective.
Our role is to help clients stay focused on their long-term goals rather than short-term noise or chasing returns and to build plans around real lives and real outcomes - not predictions.
If you’d like to review your KiwiSaver, investments, or long-term plan, we’re always happy to chat.
Listen To The Full Conversation
We recently unpacked the SPIVA report on the latest episode of the Dollars & Cents Podcast: “Are Expensive Funds Delivering Better Results?” Listen on your favourite platform.
📞 Phone: 0800 NO STRESS (0800 6678 7377)
📧 Email: info@foxplan.nz