To Manage Your Investment Portfolio, Manage Yourself

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18 Νοε 2013 (πριν από 3 χρόνια και 8 μήνες)

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Wealth and Investment Management

To Manage Your Investment Portfolio, Manage Yourself

Aaron S. Gurwitz, PhD

Chief Investment Officer


June 2012



2

Sell date,

quarterly

70
70
75
75
80
80
85
85
90
90
95
95
00
00
05
05
10
10
If you bought in 1975 and sold in
1995, your average annual return
would have been 12%

MSCI World
Equity
Annualised
Returns

<
-
5%

-
5% to
0%

0 to

5%

5 to

10%

10 to
15%

>15%

Buy date,

quarterly

Past performance is not a reliable indicator of future results

Source: MSCI World Index, 1970
-

August 2011,
Barclays Wealth

3

70
70
75
75
80
80
85
85
90
90
95
95
00
00
05
05
10
10
Zone of Anxiety

Sell date,

quarterly

Buy date,

quarterly

<
-
5%

-
5% to
0%

0 to

5%

5 to

10%

10 to
15%

>15%

No nominal losses over any
holding period of 12 years or
more

MSCI World
Equity
Annualised
Returns

Past performance is not a reliable indicator of future results

Source: MSCI World Index, 1970
-

August 2011,
Barclays Wealth

4

70
70
75
75
80
80
85
85
90
90
95
95
00
00
05
05
10
10
Sell date, quarterly

Buy date,

quarterly

<
-
5%

-
5% to
0%

0 to

5%

5 to

10%

10 to
15%

>15%

MSCI World Equity Annualised
Returns

4

Unusually Good Short
-
term Returns

5

0%
10%
20%
30%
40%
50%
0
1 Year
2 Years
3 Years
4 Years
5 Years
6 Years
Myopic Loss aversion and the
Anxiety

premium

In times of stress our emotional time horizon
shortens and distorts our risk perception

Time Horizon

Probability of Loss at different holding periods

Zone of
Anxiety

Source: MSCI World, 1970
-

August 2011, Barclays Wealth

6

6

6

The journey matters!

Portfolio Return

Time

7

7

7

The journey matters!

Portfolio Return

Time

Reversion to the Mean

8

8

8

The journey matters!

Which investor is happier at the end?

Portfolio Return

Time

Danger of buying high

9

9

9

The journey matters!

Portfolio Return

Time

Danger of selling low

10

10

10

The journey matters!

Which investor is happier at the end?

Portfolio Return

Time

Danger of selling low

Danger of buying high

11

0
50
100
150
200
250
300
350
400
450
500
Jan-87
Jan-90
Jan-93
Jan-96
Jan-99
Jan-02
Jan-05
Jan-08
Jan-11
Total Return
(buy and hold strategy)


Source: Study commissioned by Barclays Wealth at Cass Business School,

Clare & Motson (2010) Do UK retail investors buy at the top and sell at the bottom?; UK
equity funds from 1992 to 2009 recorded by the Investment Management Association

Investor Return

(actual investor returns)

The Behaviour Gap


= 1.2%
per year


minus

Total Return

£430,000

Investor Return

£360,000

Behaviour Gap

£ 70,000

£100,000 compounded over 24 years…

The Behaviour Gap




-

16%

12

How can we overcome anxiety.


Adopt a Total Wealth Perspective.


Diversify your asset allocation.


Focus on total return.


Engage in systematic tactical asset allocation.

13

13

Total wealth

perspective

Business and
Opportunistic
Investments

Emotional and consumption
holdings

Long
-
term diversified
investment

Holdings where investor
exercises direct control

Investment

Portfolio

Less

Risk/Return

Efficient

More

Risk/Return

Efficient

Less

Risk/Return

Efficient

Personal

Holdings

14

Diversification reduces risk and anxiety

70
70
75
75
80
80
85
85
90
90
95
95
00
00
05
05
10
10
90
90
95
95
00
00
05
05
10
10
<
-
5%

-
5%
-

0%

0%
-

5%

5%
-

10%

10%
-

15%

>15%

90
90
95
95
00
00
05
05
10
10
90

MSCI World Index

Barclays Wealth SAA3

Past performance is not a reliable indicator of future performance

Source: MSCI World Index, Barclays Wealth

15

0
50
100
150
200
250
300
350
400
450
500
93
95
97
99
01
03
05
07
09
11
Perceived risk vs. return of equity investing

Value of initial £100

Total Return

Price Return

Cash

Price only

Total Return

Return

8.0%

13.6%

Risk (vol)

19.9%

20.4%

Source: Bloomberg and MSCI World Total and Price Returns Index

16

0

50

100

150

200

250

300

350

400

450

500

Jun
-
87

Jun
-
90

Jun
-
93

Jun
-
96

Jun
-
99

Jun
-
02

Jun
-
05

Jun
-
08

Jun
-
11

Buy and Hold

Sell Dips, Buy Surges

Buy Dips, Sell Surges

NAV June 87=100

Systematic Tactical Asset Allocation:

Buy low, sell high … and rebalance

Best behaviour:

Buy low, sell high improves
risk adjusted performance by 70bps per year

Bad behaviour
: Buy high, sell low costs 90bps risk
adjusted performance per year

Performance starting with 60% MSCI World, 40% Cash

Past performance is not a reliable indicator of future performance

17

17

Job (
בויּא
) would have been a successful investor.

18

Disclaimer

This document has been issued and approved by Barclays Bank PLC. Although information in this document has been obtained from

so
urces believed
to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This docume
nt
does not constitute a
prospectus, offer, invitation or solicitation to buy or sell securities and is not intended to provide the sole basis for any

ev
aluation of the securities or any
other instrument, which may be discussed in it. All estimates and opinions included in this document constitute our judgement

as

of the date of the
document and may be subject to change without notice. This document is not a personal recommendation and you should
not rely
upon any opinion or
statement contained in this document without seeking further advice tailored for your own circumstances. This document is con
fid
ential and is being
submitted to selected recipients only. It may not be reproduced or disclosed (in whole or in part) to any other person withou
t o
ur prior written permission.
Law or regulation in certain countries may restrict the manner of distribution of this document and persons who come into pos
ses
sion of this document
are required to inform themselves of and observe such restrictions. We or our affiliates may have acted upon or have made use

of

material in this
document prior to its publication. You should seek advice concerning any impact this investment may have on your personal tax

po
sition from your own
tax adviser.

Barclays
offers wealth and investment management products and services to its clients through Barclays Bank PLC and its subsidiary com
pan
ies.
Barclays Bank PLC is registered in England and authorised and regulated by the Financial Services Authority. Registered numb
er
is 1026167 and its
registered office is 1 Churchill Place, London E14 5HP.

In Israel, Barclays Bank plc may offer investment marketing services to investors that are not
"Eligible Investors", as such term is defined under applicable law, only through bankers licensed by, or otherwise appropriat
ely

registered with, the Israel
Securities Authority.“

©
Barclays Bank PLC 2012. All rights reserved. Issued for companies including Barclays Bank PLC (Reg. No. 1026167), Barclays St
ock
brokers Limited
(Reg. No. 1986161), a member of the London Stock Exchange and PLUS, Barclays Share dealing (Reg. No. 2092410), Barclays Bank
Tru
st Company
Limited (Reg. No. 920880) and
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Investment Management Limited (
Reg

No. 2752982), a member of the London Stock Exchange. All of these
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