There are two things to bear in mind. First, somewhat obviously, patience may be required. Historically, the short-term returns from purchasing at above-average volatility are inferior. More importantly, the current geopolitical environment would suggest that things are as likely to get worse for Russian equities as they are to get better.
Secondly, the data in the chart above only go back to 1997. There is an obvious risk on relying too much on recent data. There was no S&P Russia BMI index a hundred years ago, but no doubt if there had been its volatility would have been quite high in 1917; the subsequent destruction of all forms of private capital would provide a counter-example to the general rule of buying at periods of high volatility.
This, of course, is not 1917. Neither is it the turbulent times of the Napoleonic wars that so rewarded the Rothschilds’ historical adventures. But historically, in the long term, fortune has favoured the brave, especially (or perhaps exclusively) the patient brave. This is something to bear in mind as you consider the situation in Russia.
This article was written by Tim Edwards, direct, index investment strategy, S&P Dow Jones Indices.
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