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Emerging Market Equities: Returns, Risk, and the Long View
Emerging market equities promise growth, but the journey has never been smooth. Over the past decade, they have badly lagged developed markets, returning only 3 per cent per year against nearly 10 per cent for MSCI World. Yet step back to a twenty-year view and the picture looks different: emerging markets have delivered close to 10 per cent annually, outpacing developed markets. Since their inception in 1988, returns have been broadly similar between the two, though emerging markets have endured far deeper drawdowns and longer recoveries.
The central question is whether investors can rationally expect a return premium from EM. Valuations today suggest they should: price-to-earnings ratios are lower and dividend yields higher than in developed markets, particularly the US. But higher expected returns are not guarantees.
Are US Equities in a Bubble? Or Just Priced for a Different World?
Whenever the S&P 500 makes new highs, ‘bubble’ talk returns. Valuations are undeniably rich—CAPE in the high 30s and forward P/Es above long-run norms, but ‘high’ is not the same as ‘irrational’. A lower and more stable inflation/real-rate backdrop, an economy heavier in intangibles, accounting changes, curated index construction, and easier market access can all support a higher equilibrium multiple than in earlier decades. The takeaway is that from rich starting points, long-run returns tend to be lower.
Do Lower Investment Fees Lead to Greater Wealth?
It is no secret that investment costs eat into returns, yet few investors appreciate the scale of the damage when those costs are layered. Fund charges, platform fees, adviser fees, and discretionary management can easily add up to 2–3% per year. Whilst that might sound modest, the compounding effect is severe: over 40 years, a high-fee portfolio can leave you with less than half the wealth of a low-fee alternative. Academic and regulatory evidence shows higher fees rarely deliver better outcomes—making cost one of the few factors investors can and should control.
The Paradox of Financial Research: Why Smart People Disagree
The deeper you go into financial research, the harder it becomes to hold unwavering conviction. For every rigorous paper supporting one strategy, there’s another—equally credible—challenging it. Highly intelligent, empirically-minded researchers often reach different conclusions, not because one is right and the other wrong, but because markets are complex, adaptive systems. There’s no single ‘optimal’ portfolio, only a range of plausible approaches shaped by assumptions, preferences, and behavioural realities. In the end, what matters most is not whether your chosen strategy is perfect, but whether it’s grounded in evidence and robust enough to stick with when doubt inevitably creeps in.
Good financial decisions aren’t about predicting the future—they’re about following a sound process today.
In investing, outcomes are noisy. Short-term performance often reflects randomness, not skill. Yet fund managers continue to pitch five-year track records as if they prove anything. They don’t.
As Ken French puts it, a five-year chart ‘tells you nothing’. The real skill lies in filtering out the noise—evaluating strategy, incentives, costs, and behavioural fit.
Don’t chase what worked recently. Stick with what works reliably.