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Jellybeans, anyone?

02 February 2017 | Topical insights

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Tania Allerton

Commentary by Tania Allerton, Sales Manager, Business Development Managers.

Our friends in marketing have just updated one of my favourite charts – one that encapsulates so much of what we talk to advisers about every day.

It's the much-loved "jellybean chart", also known by some as the patchwork quilt or periodic table. I don't know where these names come from, but let's go with jellybean for simplicity's sake.

When the annual update of the chart comes through, I always like to play a little game. I look at last year's version, then I think about what's happened over the past year and try to predict what the new column of returns will look like.

So this year I was thinking about Brexit, of course; the United States election; concerns about China; bond market worries; sluggish but still positive global growth … the list goes on.

When I looked at the chart I was pleased to see that all of the returns were positive. But, as ever, there were a few things that surprised me. I was surprised to see that the top two blocks were emerging markets (so much for those concerns about China) and the US (few market participants thought the market would react quite so positively to Mr Trump's election).

Hedged global bonds were at the bottom, delivering a modest positive return but, more importantly, providing the diversification and balance that investors hold them for. Much higher up came index-linked gilts – that was another surprise.

Of course, there are lots of factors that go into these market returns every single day, and they all play out in some unexpected ways over the full year. But my point is this: if it's so hard to guess the ranking of the markets after the end of the year, what chance have we got of doing it in advance?

The marketing team does a nice version of the jellybean chart with the LifeStrategy 60% Equity Fund included. It shows us that, while all the other colours jump around on the whims of market sentiment, a globally diversified, strategically allocated portfolio of equities and bonds helps to smooth those returns over the long term.

And if you're trying to help your clients achieve their goals whilst still sleeping at night, that can't be a bad thing.

Important information:

Past performance is not a reliable indicator of future results.

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The opinions expressed in this article are those of the individual author and may not be representative of Vanguard Asset Management, Limited.

The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC. For further information on the fund's investment policy, please refer to the Key Investor Information Document ("KIID"). The KIID and the Prospectus for this fund is available in local languages from Vanguard via our website https://global.vanguard.com/.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

VAM-2017-01-30-4296

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