The risk and reward of investing

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2 Terms and Conditions
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Disclaimers
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The risk and reward of investing

All investing carries consistent risks, but does it also bring consistent returns? Analysing investment returns over short periods is unreliable, since markets are subject to both bubbles and slumps. Larger time periods using larger sums of money can give better insight into whether the investments have indeed been worth the risks involved.

A new research paper co-authored by Robeco’s Head of Quant Research, Laurens Swinkels, aims to answer this question. The paper examines the risks and rewards of investing by constructing a hypothetical multi-asset market portfolio valued at USD 150 trillion – a sum greater than global GDP in 2024 – and spanning half a century, running from 1970-2022.

It examines the returns on a monthly frequency, which allows for a more accurate estimation of investment risks compared with previous studies. Even though the Sharpe ratio – which compares the investment return with the risks taken – of the global market portfolio is not much higher than that of equities, it is much more stable over time. The drawdowns of the market portfolio are also much less severe. The results are intriguing.

Important information

This information is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation. The contents of this document have not been reviewed by the Monetary Authority of Singapore (“MAS”). Robeco Singapore Private Limited holds a capital markets services license for fund management issued by the MAS and is subject to certain clientele restrictions under such license. An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.