The global share price meltdown hammered returns on thousands of investment funds that ordinary savers and investors bought to generate income in retirement.
Some of the most popular of all took a real beating, notably the best selling Scottish Mortgage Investment Trust and Baillie Gifford American.
Both invested in heavily in US technology stocks such as Tesla, Facebook owner Meta, Netflix and Amazon, which crashed last year. Investors lost half their money as a result.
Yet astonishingly, huge numbers of Isa savers continue to buy Scottish Mortgage, hoping it will recover its lost glories.
So far this year, UK investors bought Scottish Mortgage more than any other investment trust, said Laith Khalaf, head of investment analysis at AJ Bell.
“Scottish Mortgage retains a loyal following, despite an exceptionally poor 2022, when it fell more than 42 percent.”
Despite last year’s losses, Scottish Mortgage has made people lots of money over the longer term.
“It has returned 90 percent over five years, which would have turned a £10,000 investment into £19,000,” Khalaf says.
Yet the real beneficiaries are those who invested for an even longer period. “Over 10 years, it has delivered a total return of 420 percent, turning £10,000 into £52,000. So it’s easy to see why investors are keeping the faith.”
Someone who invested £10,000 some 20 years ago would now have a staggering £160,000, showing the rewards of long-term equity investing.
However, past performance is no guide to the future. The big question is whether Scottish Mortgage and other struggling investment funds can fight back in 2023 and beyond.
Scottish Mortgage is showing a glimmer of recovery. It is up 4.26 percent so far this year but there is no guarantee it will recapture former glories.
Baillie Gifford American crashed more than 50 percent last year, but it is fighting back with greater vigour. It has jumped 18.89 percent in the last month.
That will help to ease some of last year’s losses, although it remains a higher risk fund and is not for everyone.
Khalaf said investors should not sell underperforming funds at the first sign of trouble, as they will only crystallise their losses and lock themselves out of the recovery.
Many will consider that now is a good time to buy these funds as they are much cheaper than a year ago, but investors must understand the risks as well as the rewards.
Just because US tech stocks rocketed for a decade, does not mean they will repeat their performance. That was in a different era, when interest rates were near zero and inflation non-existent.
Today, growth companies face higher borrowing costs, while inflation will reduce the value of their future earnings in real terms.
Tech giants such as Amazon, Facebook owner Meta and Google are now laying off staff to cut costs, which is a worrying sign.
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Many investors seem to have got the message, and are sticking to tried and tested funds tracking the US and UK stock market.
The UK’s FTSE 100 was one of the few markets in the world to rise last year, climbing 0.9 percent.
So far this year it has climbed 4.5 percent and on Thursday hit an all-time high of almost 7,950, before retreating slightly.
The iShares Core FTSE 100 ETF tracks the index and is also in demand.
Every investor should make sure they understand exactly what they are buying, and check it slots alongside existing investments.
Never go all-in on one fund or sector, or invest in shares for less than five years.
