The Morning Ritual
I'd like to say it doesn't bother me when equity markets drop a few points, but it does. And trust me when I say I am not jumping through hoops when they drop by more than just a few points. I hate it.
Every morning, for as many years as I can recall, the first thing I do whilst enjoying my double-shot flat white is log onto Transact. I don't like to see every pound that existed yesterday worth a reduced 90, 80, or 70 pence on paper. It's not particularly pleasant viewing, is it.
For what it's worth, I am 100% invested in equities — so it always looks worse as I scroll down.
The Dips Always Pass
Based on historical data and general market patterns, the average intra-year decline on the MSCI World Index has typically ranged from 10–15% from peak to trough within a single year.
In severe downturns — the 2008 financial crisis, the dot-com bubble burst in 2000, the early 1970s stagflation — the MSCI World Index dropped far further, sometimes exceeding 30–40% within a single year.
But here's the thing: the dips always pass.
The Numbers That Matter
The image below is one I return to regularly. It's sourced from the 2024 Dimensional Matrix Book and covers data from 1985 through to 31st December 2023. It shows the 100% Bond model on the left, with 20% equity increments across to the 100% Equity model on the right.
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The red numbers paint the gloomiest picture — the worst 1 and 3 year returns over nearly four decades.
- From 2006 to 2009, the 80% equity portfolio was 7.65% underwater. Not pleasant.
- Coming out of the 1989 crash, a 100% equity portfolio was down 34.12% over twelve months.
Now look at the black numbers.
- That same 80% equity portfolio shot up by 59.01% in just 365 days.
- It then delivered 25.43% year on year, back to back, for 3 years.
- The 100% equity portfolio — the one that had been 34.12% underwater — went on to gain 71.22% between 1992 and 1993, and then annualised 30.33% back to back between 2003 and 2006.
Something to behold.
The Danger of Trying to Be Clever
If we try to juggle the tops and bottoms — which is impossible to get right, and keep getting right, contrary to what some may say — or if we abandon the plan in the short term out of frustration at not reaching these heights every week, month, and year, we ruin the plan.
We jeopardise our chances of securing an income we cannot outlive, through this ever-rising cost world we live in.
One must keep the faith.
Why the Asset Allocation Works
The model we deploy is built on the Dimensional Core Wealth Plus framework and includes approximately 15,000 listed stocks across all classes — large-cap, growth-cap, small-cap, and value-cap — securing comprehensive exposure across both developed and emerging markets.
This isn't guesswork. It leverages scientific principles and empirical data proven effective over the past eight decades.
For over a decade, we have used Dimensional to access those markets — providing access to institutional-grade investment funds typically unavailable to retail investors.
The 2024 Matrix Book is available in both hard copy and PDF on request.
If market volatility has you questioning your current plan — or you don't yet have one — let's talk. We can provide an in-depth portfolio review and show you exactly where you stand.
Contact us today or call 0345 200 4041 to arrange a free consultation.
Originally penned on16 August 2024
Image taken from the 2024 Dimensional Matrix Book and used with permission. Past performance is not indicative of future results and the value of any investment may go down as well as up. The information provided is for educational purposes only and should not be interpreted as personalised investment advice.
