Robeco, The Investments Engineers

30-09-2024 · Research

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.

    Authors

  • Laurens Swinkels - Head of Quant Strategy

    Laurens Swinkels

    Head of Quant Strategy

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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.

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