Can you really get rich quick?

Sam Slator 22/04/2021 in Global, Fixed income

It’s a been an exciting year for investors so far. Armed with extra savings and nothing much to spend them on, retail investors have been getting more involved than usual in the stock markets.

Users of social media site Reddit pushed the shares of US video game retailer GameStop up some 2,200% in January. Bitcoin is up 620% in a year and Tesla is up 390% over 12 months. The gains have been huge, but there has also been volatility.

Bitcoin is currently down about 15% from its recent high. Tesla’s share price is down about 35% and GameStop saw its share price plummet around 85% in the space of two weeks in February.

Timing is everything. And only the lucky few get it right. You can get rich quick, but you can lose money just as quickly too.

Not got the appetite for that much risk?

Hindsight is a wonderful thing and I’ll admit to wishing I’d put £1,000 in Bitcoin last year. But having had a punt at investing in an individual share a few years ago (and getting greedy), I lost not just hours of time constantly looking at the share price but 80% of my money too.

And while £1,000 in Bitcoin would be worth over £7,000 today, even then my tolerance to risk wasn’t great enough for me to risk a sum of money big enough that the subsequent gains would have made a real difference to my retirement plans.

Luckily, for investors like me, slow and steady can win the race – or at least give you more restful nights.

A colleague ran some interesting numbers for me this week, comparing one imaginary investment returning 6% per year and a second one returning between 100% and -60% a year.

Over a decade the returns could be similar:

YearSlow & steady pot% gainGet rich quick pot% gain

Slow and steady investments

Once, a very long time ago (about 15 years to be exact), a steady 6% per annum was actually achievable with a cash savings account. I know because I had one. Not so today when 1% is a push.

And when it comes to investments – no matter which one – we all know that 6% per annum, year in, year out, is not realistic. Markets and asset prices do not rise at the same pace each year and sometimes their values fall.

But there are funds that almost make the cut.

I took a closer look at our Elite Rated offerings with a minimum 10 year track record. First, I analysed their annualised returns over three, five and ten years to identify those which had a margin of less of 2.5% between periods – to show consistency of returns.

Then I looked at their Sharpe ratios – a measure of risk adjusted returns – to make sure that these funds were not taking excessive risk to achieve their results. A score above one is the aim.

And I found some gems. The pick of the bunch were three bond and two equity funds:

FundAnnualised returns – 3 years*Annualised returns – 5 years*Annualised returns – 10 years*Max drawdown*Sharpe ratio*Cumulative return over 10 years*
BlackRock Corporate Bond4.89%5.25%5.9%-11.25%1.1377.46%
Jupiter Strategic Bond4.43%4.44%5.16%-8.71%1.2965.44%
Rathbone Ethical Bond5.96%6.66%6.63%-10.63%1.4690.10%
Fundsmith Equity18.19%18.14%18.53%-16.65%1.37447.25%
Morgan Stanley Global Brands16.31%14.47%13.91%-15.70%1.05267.73%

These funds may not make you the richest investor in the world, but they could make you one of the happiest. They have consistently offered attractive returns without causing sleepless nights wondering whether a bet will pay off or not…

*Data sourced from FE fundinfo. Total returns in sterling, as at 21 April 2021.

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.