Save, make, understand money

Experienced Investor

Long-term investors make a positive return 98% of the time

Cherry Reynard
Written By:
Cherry Reynard

The stock market is volatile in the short-term, but new research shows that those who remain invested for at least 10 years generate a positive return 98% of the time.

The research from Willis Owen looked at the total return of the FTSE 100 over 10 years on a rolling monthly basis since January 1986. It showed that over this period, there were just six 10 year rolling periods when investors would have lost money out of a possible 281.

Investors would only have lost money if they had invested right at the peak of the Dotcom bubble (31st January 1999) and then sold when the market was still struggling in the wake of the financial crisis (31st January 2009). June 1999 to June 2009 would have produced similarly weak returns. 

The analysis shows that investors received a positive return 88% of the time if they invested for five years.

Most investors could have expected a far better return. The FTSE 100 gave an average total return of 139.3%. The largest 10-year return was 433% and the biggest loss was 14.5%. 

Adrian Lowcock, head of personal investing at Willis Owen, said: “In the short-term, markets can be extremely volatile as they are driven by news and buffeted by swings in sentiment as investors place an over importance on the pervading headlines.

“However, the analysis clearly demonstrates that time in the market is more important than timing the market. Investing for the long-term is the wisest course of action and as we have seen this month, markets can be volatile in the short-term.

“Only if you had bought during the height of the dotcom bubble and subsequently sold at the lowest points of the financial crisis 10 years later you would have lost money. This fact highlights the importance of staying calm and not selling after markets have fallen.”

Lowcock gives three tips for successful long-term investing:

Stay calm: Only make investment decisions when you are calm and rationale. Mistakes are often made in the heat of the moment and when our attitude and tolerance for risk is low. 

Remember your goals; Remind yourself what you are investing for, whether it is retirement or a dream holiday. When will you need the money? Will it be in the next couple of years, or not for the next few decades?

Become a contrarian:  Be greedy when others are fearful. When everyone is selling think about doing your annual ISA or SIPP allowance, buying funds that you want to hold for the long term.