1) Above-average long-term performance due to active management
One of the most successful financial managers devoted to long-term investing is Warren Buffett. With his holding company "Berkshire Hathaway", he mainly invests in exceptionally successful enterprises, applying "value-investing" and "growth-investing" methods. Typically, Buffett remains loyal to his main holdings for decades and is not irritated by market fluctuations.
The graph on the left shows the value increase of Warren Buffett's holding company "Berkshire Hathaway" in comparison to global equities (measured by the STOXX ® Worldwide in 1800 Net Return Index) in US $. In the period since 1992, global shares have yielded about 295%. Berkshire Hathaway rose by 1300% during this time - more than 4.4 times more than a representative market index.
2) Above-average performance due to indexation
An investor who does not trust fund managers or wants to avoid their high costs can invest in index-linked funds, i.e. funds that replicate market indexes. These funds are generally much cheaper than conventional funds. Normally this leads to a performance that is very close to the market performance. However, with the right choice and combination of indexes, an above-average performance is also possible with an index-linked strategy.
Numerous empirical studies have shown that the shares of companies with stable earnings have not only been less volatile than the whole market, but have also achieved above-average value increases over the long term. In the following graph, the development of an index for companies with stable earnings is compared with the development of a market index. The index for companies with stable earnings is calculated as an average of the STOXX ® Europe TMI Food Producers Net Return Index, the STOXX ® Europe TMI Household Goods Net Return Index and the STOXX ® Europe TMI Health Care Equipment & Service Net Return Index. The market development for European shares is measured with the STOXX ® Europe 600 Net Return Index.
In the period since 1992, shares in European companies with stable earnings have achieved a performance of 1520% - more than twice as much as the whole market with 580%. They have also been less volatile. During the run on technology shares until 2000 and during the bear markets in 2003 and 2008, the price movements were much more moderate.
Investors can pursue a passive long-term strategy of this kind with investments in index-linked sector funds whose development reflects the performance of the respective sectors.