Investors need to take a long-term view

risk and reward

With investors seeing disappointing returns over periods as long as 30 years, they will need to have realistic expectations and should be reminded of the importance of yield in delivering performance

There is a paradoxical view of risk in the equity market. First, because equities are risky, they offer a better return than risk-free assets - that is, the equity risk premium (ERP). Second, if you hold equities for long enough, they will always give you a better return than risk-free assets. So, if you are patient, equities are, in effect, risk free and will always reward you with the equity risk premium. This is clearly a sophism as something cannot be risky and yet risk-free. Fortunately, there are two ways out of this paradox: first, perceived risk is not always the same as actual ri...