24% Returns, But No Celebrations

A Look at the Markets - 2024

As we embark on the new year, let’s examine the performance of certain assets in 2024.

To begin with, we can consider the S&P 500, America’s premier stock market index that tracks the performance of 500 major companies, serving as a benchmark for equities.

The chart shows an impressive 24% increase in 2024. While most of us can agree that this is an excellent year, I do not get carried away. The S&P 500 consists of good and bad years, as shown below.

As we can see, the performance in any one year is not significant - it is the return over longer time periods that matters for building wealth. I do not over-celebrate good years and, more importantly, I do not get too worried about bad years. They are all part and parcel of being an investor.

Having looked at the S&P 500, let’s turn to some of my assets.

Vanguard FTSE All-World UCITS ETF Accumulating

This global ETF offers a slightly higher return compared to the S&P500. While this will not happen every year, the primary objective for me is to achieve a comparable return with enhanced diversification.

As mentioned earlier, the long-term performance holds greater significance for me. Here’s the 5-year chart for reference.

Considering the uncertainty surrounding the Covid period, I believe a 72% return over a 5-year period is still a commendable achievement.

Vanguard EUR Corporate Bond UCITS ETF Accumulating - 2024

Corporate bonds should be less volatile, and therefore less exciting, than equities. The chart shows a 4.65% return which is fine. Next year’s performance will depend on interest rate decisions (falling interest rates are good for bond prices).

In this case, the 5-year chart is not relevant because I did not invest in corporate bonds when the interest rates were near zero. I only started investing in this fund in 2023 because I expected interest rates to fall.

Bitcoin

2024 was a year of positive fundamentals for Bitcoin. It began with the approval of Bitcoin ETFs in January, leading to increased institutional adoption. The year ended with the election of Donald Trump as the next U.S. President. While Trump has promised to be more Bitcoin-friendly than previous administrations, he has also discussed the idea of a U.S. government Bitcoin reserve. All these factors contributed to a 122% return for Bitcoin.

It Doesn’t Have to be Crypto!

It is worth noting that you do not have to invest in crypto to achieve exceptional returns. However, picking individual stocks is more challenging and you must balance great performance with more average returns or even losses.

Just to take one example from my individual stocks portfolio, Rolls Royce Holdings achieved a 89% return though I did take partial profits on the way (so my return was less).

We will continue to monitor these assets, and others, throughout 2025.

No Predictions - Strategy Over Speculation

As we enter 2025, the internet is flooded with predictions for the year ahead. However, you won’t find any here. Why?

Markets are notoriously hard to predict. This year will likely prove no different, especially with the return of Donald Trump to the US presidency. His stated policies sometimes contradict each other, and which ones he will implement remains to be seen. Beyond politics, unforeseen global events - be they conflicts or resolutions - remain unpredictable.

A Disciplined Approach

Instead of relying on forecasts, I take a disciplined approach:

1. Consistent Investing: I add to my global equities ETF every month, regardless of market conditions.

2. Reactive Adjustments: For other assets, I act based on performance. If an asset drops but its fundamentals remain solid, I buy more. If it rises significantly, I take profit or partial profit.

Fundamental Guidelines

While I avoid specific predictions, I do have broad expectations that guide my strategy. For instance, I believe that the world will continue to become more digital and AI will grow exponentially. This helps me identify areas of interest without needing to guess the future.

In future newsletters, I’ll discuss some of the things I’m keeping an eye on in 2025.

Idiom of the Day: Part and Parcel

Part and parcel - noun phrase - an essential or integral component

‘Part and parcel’ is a noun phrase which means that it functions as a noun. It is non-countable because it refers to a single concept.

Thank You and Happy New Year

Thank you again for your support this year, whether by reading these newsletters or taking Business or Cambridge English lessons.

I wish you a happy and prosperous 2025!