I was eagerly watching the Wimbledon mens final this past Sunday (14 July 2024) and cheering on Carlos Alcaraz  – I am not a Djokovic fan. I am not sure what it is about Novak that irks me, perhaps I should ask many of the Wimbledon fans who seem to take a similar stance. While watching the tennis I recalled Roger Federer’s recent Commencement Address at Dartmouth College. Roger said in his speech that he had won ±80% of the matches he had played in professionally but had only won 54% of all the points he had played.  That’s seems absurdly low but true. Roger continued…

“…When you’re playing a point, it has to be the most important thing in the world and it is. But when it is behind you, it’s behind you. This mindset is crucial because it frees you to fully commit to the next point and the next point after that with intensity, clarity and focus…You want to become a master at overcoming hard moments. That is to me the sign of a champion. The best in the world are not the best because they win every point. It’s because they lose again and again and have learnt how to deal with it….”

Profound words indeed.

Intrigued, I downloaded some statistics on Federer, Djokovic and Nadal’s record in major finals. Federer appeared in 31 finals and won 20 of those, a 65% win record. Djokovic leads the pack, appearing in 37 finals and winning 24 titles, also a 65% win record. Nadal, well he is just the ultimate warrior, winning all 14 French Open finals that he has played in and 8 other major titles.

Federer, Nadal and Djokovic have won a combined 66 major titles since 2003 out of a possible 84 titles over that period – that is incredible dominance given that Nadal first won the French Open in 2005 aged 19 years and Njokovic won his first major in 2008.

Federer won every single match in the first ten major finals he played in. Then Nadal and Djokovic ruined those stats. Djokovic beat Federer in 4 out of the 5 finals they played in. Similarly, Nadal beat Federer in 67% of the final matches they played against each other. The average number of games won in their major final matches makes for interesting reading.

Federer clearly did not go down without a fight.

Deon Gouws, the chief investment officer of Credo, a London based wealth management business, mentioned Federer’s comments about losing 54% of the time in his opinion piece in the Financial Mail (11 July 2024). Gouws related this to equity markets stating the equity indices generally go up 50% of the time and down on the other days. Needing no incentive to download data and model in Excel, I proceeded to check Gouws’ assertion. He was not far off – it transpires that the S&P500 (index of the largest 500 listed companies in the USA) had a positive daily return 53% of the time from January 1971 to June 2024. On 47% of the 13,489 trading days in that period the S&P500 declined. Good luck with predicting what will happen tomorrow but over the long run, it will “even stevens”.

The All Share Index of the JSE (ALSI) followed an identical trend, up 53% of the time on a daily basis. I analyzed the ALSI over the period January 2000 to June 2024 (5,015 trading days) – refer attached for Excel file ALSI TopBottom 25 days (June 2024) Pondering about whether it is better to stay invested all the time or try to guess whether the market will go up or down is an interesting conundrum. If you had invested in the ALSI in January 2000 and held onto the index until June 2024, your annual compound return would have been 10.9% excluding dividends. Certainly, a positive real return (after inflation) however, not as enticing as investing in Nvidia.

If hypothetically you had Nostradamus’ foresight, and could predict which would be the 25 worst trading days on the overall JSE and the 25 best days, what could your returns have been? In other words, you had the foresight to disinvest out of the ALSI a day ahead of each one of the 25 worst trading days over the period January 2000 too June 2024 and then reinvest a day after the “blood bath”, your compound annual returns would have 24.2%. If you lacked that foresight and instead divested ahead of the best 25 trading days on the ALSI, and then reinvested a day later, your compound annual returns would have dwindled to 4.0%.

Einstein apparently said that compound interest is the 8th wonder of the world. As mentioned above, the ALSI return over ±24 odd years has been ±10.9% excluding dividends. Investing R1,000 back in January 2000 would translate into ±R7,878 today. If you missed the 25 worst trading days over that period, your R1,000 would have grown to R76,204. If you had missed the 25 best trading days, your initial investment would have limped in at R2,199 in June 2024. What’s the lesson here? Perhaps ask your financial advisor.

Stay safe, be warm and all the best from BeechieB.