INVESTMENT INSIGHT

inVesTing For THe Long Term

DespiTe VoLaTiLiTY, marKeTs HaVe appreCiaTeD oVer Time
Financial markets can be volatile and downturns as well as upturns are part of equity investing. But short-term declines should not detract from the potential of the stock market to help
investors meet their goals.
in fact, short-term market declines underline the case for a long-term approach to investing. The chart shows that even with market volatility, an investment in the FTse all-share index
25 years ago would have grown to more than seven times its original value by December 2014.
of course, the investment choices depend on an investors specific circumstances, goals, attitude to risk and investing time horizon. This will inuence how much money is allocated and,
if appropriate, how much of this is invested in growth-oriented equities. all financial investments involve an element of risk, so the value of your initial investment cannot be guaranteed
and the historical performance of markets is not a guide to future returns.
100,000
subprime
loan problems
emerge
2007

3,000

establishment
of the eCB
1998
asian
currency
crisis
1997

Lehman Brothers
collapses
2008

european
m&a
surpasses
Us
2007

4,000

Dot Com
peak
2000

european
sovereign
debt crisis
2010

Us loses
its aaa
credit rating
2011

80,000

71,602
68,125

september 11th
2001

LTCm
failure
1998

60,000
invasion
of iraq
2003

40,000

39,908
maastricht
Treaty
1992

20,000

10,000

FTSE
Annualised
5 year
Returns
19901994
FTSEAll-Share
All Share Annualised
5 Year
Returns
19881992
14.8%
9.7%
1990

1991

1992

1993

19951999
19931997
16.6%

20002004
19982002
2.2%

20052009
20032007
15.4%

20.3%

3.0%

6.5%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

20102014
20082012
2.5%
8.7%
2008

2009

2010

2011

2012

2013

2014

EQUITIES

9.72%

20.8%

20.49%

28.39%

5.85%

23.85%

16.7%

23.56%

13.77%

24.20%

5.90%

13.29%

22.68%

20.86%

12.84%

22.04%

16.75%

5.32%

29.93%

30.12%

14.51%

3.46%

12.30%

20.81%

1.18%

BONDS

9.61%

16.17%

18.66%

21.01%

6.27%

16.43%

7.3%

14.14%

18.93%

0.88%

8.75%

3.04%

9.25%

2.10%

6.6%

7.93%

0.7%

5.27%

12.81%

1.16%

7.20%

15.56%

2.69%

3.95%

13.85%

cASH

14.89%

11.56%

9.70%

5.99%

5.55%

6.74%

6.16%

6.92%

7.42%

5.55%

6.17%

5.07%

4.06%

3.74%

4.65%

4.75%

4.83%

6.03%

5.52%

1.21%

0.70%

0.87%

0.83%

0.51%

0.54%

source: Thomson reuters Datastream. all data from 31 December 1989 to 31 December 2014. The information provided is for illustrative purposes only and is not meant to represent the past or future performance of any particular
investment. it is not possible to invest directly in an index. equities are represented by the FTse all-share index (total return). Bonds are represented by the FTse actuaries UK gilts all stocks index (total return). Cash is represented by
three-month LiBor rates. all returns are in sterling terms and are based on monthly closing prices of the respective indices.

Keeping a Long-Term VIEW OF Markets is Important

Heres why:

Heres how to do it wisely:

You can buy investments cheaply during a downturn

By viewing market declines as an opportunity, it is possible to improve your portfolios long-term returns as
stocks recover. While nobody can predict exactly when markets will decline or rebound, adding to holdings
when they are on sale may be a smarter move than pulling out of equities when prices fall.

Be diversified
Rather than trying to pick a single investment, spreading your money across a variety of asset classes may
decrease your overall risk. It could also enhance the potential for long-term returns. This technique is often
called diversification and it can be a successful strategy because every investment will not perform in
exactly the same way over a similar time period. Spreading money across multiple investments, sectors,
regions and styles (such as growth or value-oriented stocks) reduces risk and increases the likelihood that
the best-performing asset classes will be included in your portfolio. At the same time, diversification can
reduce the impact of investing in the worst-performing products. The chart below details a 10-year snapshot
of asset class returns. It demonstrates how diversification can be a useful strategy during difficult markets.
Diversification and asset allocation may not protect you fully against market risk.

You dont want to miss the markets best performing days

Over every market cycle, there will be up days and down days. Missing even a few of the stock markets bestperforming days can result in significantly lower returns than the market index over the longer-term.
Often, a few very good days account for a large part of the markets total return. Being out of the market
means you could potentially miss out on rallies that substantially improve your long-term returns.
All financial investments involve an element of risk. Therefore, the value of your investment and the
income from it will vary and your initial investment amount cannot be guaranteed.

% Ten-year Snapshot of FTSE All-Share Sector Returns

2008

2009

2010

2011

2012

2013

2014

46.66

40.30

51.53

9.01

110.60

34.67

18.70

33.62

62.06

14.88

37.17

27.54

27.20

-13.24

78.91

31.03

14.80

32.10

33.65

13.20

Basic Materials

36.98

24.36

23.43

-13.51

31.95

28.20

11.98

22.53

33.49

9.65

Industrials

25.88

23.60
20.58

14.06
10.81

-16.62
-25.33

30.49
29.99

22.22
17.78

9.18
8.97

18.25
18.16

31.92
30.69

3.24
1.76

20.51

20.44

0.01

-28.39

28.03

15.56

7.49

18.04

20.92

0.89

17.18

20.31

-3.55

-30.99

20.70

14.64

0.02

4.71

17.16

-1.40

16.06

1.59

-5.09

-32.83

11.03

7.99

-5.52

-1.30

12.51

-4.68

15.19

1.49

-5.92

-47.90

10.08

5.04

-19.16

-1.51

11.88

-8.67

3.30

-2.02

-13.76

-54.90

5.27

3.69

-27.52

-7.86

-10.45

-10.24

BEST

2007

Oil and Gas

27.54

WORST

2006

% Ten-year Snapshot of Asset Class Returns

Sector

Consumer Goods
Health Care
Consumer Services
Telecoms
Utilities
Financials
Information
Technology

WORST

BEST

2005

Seek professional advice

History has shown that markets can be volatile, but you do not have to navigate challenges alone.
BlackRock has the experience, investment insight, global resources and breadth of products to help you
stay the course and meet your financial goals. With an unwavering focus on risk management across all
our portfolios, you can feel reassured that your assets are being managed by some of the most experienced
and best prepared investment professionals in the industry.

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Asset Class

61.55

50.50

53.51

42.77

75.37

44.07

15.98

29.76

32.77

20.23

Property

30.84

30.21

29.57

12.81

68.08

33.41

15.57

27.82

32.27

13.86

Gilts

30.23

20.59

7.36

-9.94

54.27

27.40

11.90

26.11

23.35

12.25

22.40

16.75

5.32

-28.33

50.64

23.85

5.40

15.61

21.33

3.66

Corporate Bonds
UK Equities
Large Cap

22.04

14.43

5.27

-29.93

30.12

19.52

-2.18

12.30

20.81

1.18

20.99

8.59

0.64

-38.15

27.33

14.51

-3.46

9.97

18.66

0.89

20.78

1.53

0.43

-42.34

15.10

12.62

-8.49

2.86

1.93

0.74

8.79

0.83

-2.46

-43.91

13.18

8.67

-10.06

2.70

0.88

-1.78

Smaller Growing
Companies (AIM)

Mid Cap
Small Cap

7.93

0.69

-10.55

-46.35

13.00

7.20

-12.53

0.94

-3.94

-16.53

Crude Oil

4.77

-7.48

-37.48

-61.78

-1.16

4.18

-25.19

-1.73

-27.34

-48.62

Gold

Data as at 31 December 2014. Source: Datastream. All sectors in the chart on the left are selected from the FTSE All-Share Index (total return). Percentage returns for the different asset classes shown are represented as follows: Property is represented
by the SPGIBMI UK Property Index (total return), Gilts are represented by the FTSE Actuaries UK Gilts All Stocks Index (total return). Credit is represented by the FT Fixed Interest Index (total return). UK Equities is represented by the FTSE All-Share
Index (total return). The Large Cap sector is represented by the FTSE 100 Index (total return); the mid-cap by the FTSE 250 Index (total return) and the small-cap by the FTSE Small Cap Index (total return). The Alternative Investment Market is
an international index for smaller growing companies. Oil is represented by the London Brent Crude Oil Index in US$/bbl. Gold is represented by the London Bullion Market Index in US$/troy ounce. All other asset classes are in sterling.
Past performance is no guarantee of future results.
Overseas investments may involve risk of capital loss from unfavourable fluctuation in currency values from differences in generally accepted accounting principles or from economic or political instability in other nations. Smaller company shares can be more unpredictable and less liquid than
those of larger company shares. Two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able
to repay principal and make interest payments. In the event of default, the value of your investment may reduce. Under extreme market conditions, liquidity in bond markets may fall significantly without warning and it may not be possible to sell a security at the last market price quoted or at a
value considered to be fair. In extreme market conditions it may be difficult to realise your investments. Funds specialising in commodities may seek exposure to a limited number of market sectors. Compared to funds which spread investment risk more generally through a variety of sectors, price
movements may have a greater effect on the overall value of the fund.
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