Smart money: Take the long term view when managing investments

When I was a little girl in Scotland I didn't have a piggy bank because most of my money went on ponies.
Actually, the piggy bank remained skinny because Mum used to spend all the money that could have potentially gone into it on ponies on my behalf. Thirty odd years later and only small details have changed, namely that I have grown older. Our joint enthusiasm for equestrian expenditure as an investment in fun, although currently on hiatus, is probably not to be messed with.
So, whilst the ponies kept us poor, the pennies, if looked after, (or so went the savings slogan of 1984), would take care of the pounds all by themselves. Which was largely true and a wonderful idealism before the Euro and the Royal Bank of Scotland being twenty nanoseconds away from bankruptcy.
I am, though, prone to fantasising about what one pound sterling could have bought after all this time. Let's look to the coalface of investing: the equities markets. This is where shares do the hard work of making money for you. Not in a continuously upward slant, that is not realistic, but over a period of time. Smart gals play the long game. During the long game there may be short term setbacks and periods of general fecklessness. This is where the grounded investor will triumph. Accepting that every single day of investing will not be perfect is important for success. So - back to childhood we go to see what might have been should we not have spent valuable investment money on horses. Here are three of the top performing equities, what they were worth then, and their current realisable value. Purists can overlay inflation if they wish. Figures are actually for the last twenty years, adjusted for corporate actions, and display the total percentage gain over that time.
*Royal Gold, (RGLD) Total gain 25,495 per cent
*Kansas City Southern, (KSU), Total gain 23,000 per cent (Railroads)
*Oracle, (ORCL). Total gain 17,000 per cent
A pound in each in 1991? Nominal gain today £65,495. Please note that past historical performance is not an indication of future gains nor is it meant to represent an invitation to treat on those companies. It is, however, a valuable indication of just how right things can go given great timing and opportunism by both companies in the marketplace and the financial professionals who can recognise these qualities.
*Caroline Ritchie is an NZX Advisor for Forsyth Barr in Napier and holds an NZX Diploma, BCom and BSc. For sharemarket advice contact her on (06) 835 3111 or caroline.ritchie@forbar.co.nz.
The comments in this note are for general information purposes only. This article is not intended to constitute investment advice under the Securities Markets Act 1988. If you wish to receive specific investment advice, please contact your Investment Advisor.
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