The important decisions facing investment advisers

UK EQUITY INCOME

Valuation, not past performance is the best guide to future returns.

As the 20th century ended, equity investors had just experienced one of the most lucrative decades ever. The S&P 500 total return was 433% in comparison with the 100-year treasury total return of 96%. As books such as Dow 36,000 appeared on the shelves, the conclusion many investors reached was equities were, and would always be the place to invest, and so they poured money into equities and partly funded this from withdrawals from bonds. In 1999 and 2000, around $500bn of new money went into equity funds in the US while around $50bn was withdrawn from bond funds. Not only were invest...