The market when it has managed to lunge forward during the past 18 months has just as swiftly fallen straight back - its lumbering behaviour, akin to that of flesh-devouring zombie in a George A. Romero horror-flick, has served only to give investors the jitters.
The Guardian’s Rupert Jones earlier this month described how he had patiently saved in a FTSE tracker fund for nearly 10 years’ – only to now find it is worth less than he has paid in – after it had plummeted by 22% over a mere six months.
In the past 18 months alone, the portfolios of loyal stock market investors have been all but savaged - the cash really would have been better off glued to the underside of a bed. 
Understandably Jones, alongside many This is Money readers has raised the obvious question and debate? Is saving via shares an utter waste of money, and indeed time?
After all he followed, as did many, the standard instructions doled out by experts - he drip fed his cash into the market as opposed to dumping in one lump sum in a bid to avoid steep losses. At least, he thought that’s what he was doing it for.
The Barclays Equity Gilt Study, which examines the long-term returns on a variety of assets, describes the past 10 years as a 'lost decade' for shares, where ‘equities have been the worst performing asset class since 1997, sharply underperforming all other asset classes’.
It says: ‘In nominal terms, the -0.3% annualised return from US equities since 1998 is the fourth-worst 10-year return of the past 83 years. Only those 10-year periods ending in 1937, 1938 and 1939 have delivered lower returns. Similarly, over the past 109 years, only the decade ending in 1974 saw a weaker 10-year nominal return from UK equities. For the sake of record, the 1964-74 UK equity return was 1.02%, while the 1998-2008 return was 1.05%.’
Barclays research points out that during the past 110 years, there have been some 16, 10-year periods that bear resemblance to the decade just past and like in the past decade in which investors who prudently re-invested their dividends lost money after inflation - each time, they made money in the next ten years, by an average of almost 11% a year even after factoring in rising prices.
But overall, up until the end of 2007, the equity party raged on. Since then the ‘hangover’ has kicked in. Looking at the discrete performance of a variety asset classes over the past 10 years (to the end of 2008 according to research from HSBC) UK equities have only been the very worst performer in 2008 and second worst in 2000. Topping the pile on no less than three occasions have been commodities, in 2000, 2002, and 2007 but then resources fell off a cliff in 2008. In 2000-2002 inclusive global equities were the second best performers but the best in 2004 and 2006. UK equities were second best in 2003, 2004 and 2007.
It is only really since late 2007 that the good returns have been wiped away. Of course, some argue that, by drip feeding your cash into the stock market in small bite-sized chunks, to avoid swift and large losses, all you are effectively doing is diluting potential returns.
Jones’s colleague Ruth Sunderland at sister paper The Observer, however, gingerly makes a case for equities, she acknowledges that that current climate represents, ‘difficult times for those of us who still, just about, believe in stock market investment’.
A cursory glance over the performance of Britain’s major indices – the FTSE 100 and the FTSE All-Share – does not make for happy reading.
The FTSE 100 index of the UK’s top firms has collapsed by 29% over one year, 40% over two and by 35% over three. Meanwhile the overall market, as represented by the FTSE All-Share has echoed the falls of the top 100 firms, with the index down by practically identical amounts over each period.
Meanwhile, the bank rate, after continually dropping since October last year to just 0.5% today, has done little favours for those savers who have sought some refuge in cash.
But some of the best known stock market gurus have pushed their heads above the parapet. Warren ‘Sage of Omaha’ Buffett, the world’s most famous investor back in October was making ‘buy’ calls, although the market has continued on a downward trajectory since. The likes of the Madoff scandal have hardly helped boost confidence in the US, mind.
But the UK’s best-known investor, Anthony Bolton of Fidelity, has also been calling the bottom of the market – he did in the autumn 2008 too though. While they have gotten their calls wrong before, more importantly, given their individual track records (not to mention personal wealth) they tend to get it right far more frequently. And Mark Mobius of Templeton joins the two luminaries who have faith in a rally.
However, professional trader and chartest Bill Adlard told This is Money at the start of the year that he believes that over the coming five years the FTSE 100 could fall by around 90% - from its all time high in 1999 of 6930. ‘It could easily be below 1000 in five years time,’ he said. Extreme? No doubt but Adlard said 12 months earlier that the Footsie would drop by 40% during 2008 – many rubbished that claim but he still turned out to be right.
What is certain is that investors will require nerves of steel to get through the vagaries of the next four to five months but as David Buik, of stockbrokers, BGC Partners points out: ‘Faint heart never won fair lady.’
He adds: ‘Also given a choice, perhaps emerging markets, particularly those associated with Asia and the Far East offer superior appeal. Needless to say the UK and the Eurozone provide the least appetising arenas.
Confidence plays such a dramatic role in any recovery mode. Many also suspect that there may be another pull-back or shake out before equities put their best foot forward. However it will surely be better to have some involvement rather than remain on the sidelines argues Buick. And defensive shares with a decent dividend can start to look attractive.
He says: ‘Well done to those who bought banks and insurers 10 days ago. Your resolution and stoicism deserves those just rewards. Will financials crack on? It may be a painful process. Though sticking with mining, oil and gas, utilities, tobacco and selective retail stocks may prove sensible to those who require a reasonable sleep pattern. For those ‘gung-ho fixed bayonet and over the top’ approach enjoy the banks autos and insurers.’
Shares, whether you consider them dead or alive, do still exist (as the undead?) and they represent a playground exclusively for the very brave.
