Elroy Dimson

Emerging markets have broadly moved in line with developed markets, but they've actually done a little bit better.

But if you look at the entire series, there were some very substantial losses.

It's a warning, really, that there's no guarantee, particularly based on extrapolating from the past, that an investment strategy will pay off going forward.

I think there's another twist on this.

And that is that you focus on the individual investor

and you focus on people who are using institutional products.

So you might want to ask yourself, this is entirely hypothetical, what would happen if you were selling a global fund, let's suppose it's 1948, and you say, we think Germany looks really good.

We suggest you stick a quarter of your assets into Germany.

they would have been phoning out for men in white coats to take you out.

Afterwards, we see that if you bought into an emerging market like that, you would have done very well, but you would have had to be ever so brave.

It would not have been a saleable proposition to retail investors and would not have been something which if you were managing a pension fund or some other scheme institutionally, you could have pursued.

So being

counter-cyclical, focusing on cases where there is a scope for a very substantial recovery, you just got to be awfully brave.

As part of the dilemma, we have looked at the impact of strategies

where you systematically buy into stock markets that have done poorly or sectors that have done poorly.

The outcome afterwards is two things.

First of all, if you've done poorly in the past, it's a more volatile market.

So you're more likely to do very badly.

You're also more likely to do very well.

In the long term, if you buy into markets that have collapsed, you will be ahead of the game.