Long-Term Investing Reaps Rewards 98% Of The Time

The odds are in investors' favour if they put their money in the market for at least 10 years, research from Willis Owen shows

Holly Black 3 June, 2019 | 9:43AM
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Long-term investors really do reap rewards, according to number-crunching from investment platform Willis Owen. Its research shows that investing for a 10-year period leads to positive returns 98% of the time.

Willis Owen analysed an investment in the FTSE 100 over rolling monthly periods from 31 January 1986 to 30 April 2019. Out of a total of 281 10-year investment periods across that time frame, there were just six when investors would have lost money.

The average 10-year return over the period was 139.4%. Those who invested their money for 10 years from March 1988 and March 1998 would have enjoyed the strongest gains, with a total return of 433.4%.

Only those who started investing at the peak of the dotcom bubble and sold at the height of the financial crisis would have lost money. The six periods which would have led to negative returns include those which ran from 31 January 1999 until 31 January 2009, and investments started in the subsequent five months. The weakest performance was suffered by those who started investing in February 1999, who would have lost 14.5% over 10 years.

Adrian Lowcock, head of personal investing at Willis Owen, says: “In the short-term, markets can be extremely volatile as they are driven by news and buffeted by swings in sentiment as investors place too much emphasis on headlines. But analysis clearly shows that time in the market is more important that timing the market and investing for the long-term is the wisest course of action.”

Experts typically suggest that any investment should be for a minimum of five years and the longer the time horizon you have to invest, the better. This is because long-term investments benefit from compound interest, where you earn interest on the gains you have already made, effectively supersizing your returns. It also allows you to ride out any ups and down in the market over time.

10 years

Even during the worst periods of volatility, the most effective investment strategy is often to weather the storm rather than panic and sell. Some of the worst examples include Black Money in 1987, when global stock markets across the world plunged and the FTSE 100 fell by more than 50% in two months.

But research by The Share Centre shows that those who stayed invested would have made impressive gains. It looked at an example of an investor who drip-fed £1,000 a year into the FTSE 100 in monthly installments in the two years before and after the crash – a total of £4,000. By October 1989, two years after the crash, the value of their money would have soared 59% to £7,932.

Andy Parsons, head of investments at The Share Centre, says: “Investing can seem daunting, particularly in the midst of political and economic uncertainty. But the priority should be time in the market and the best way to invest for the long-term is to drip feed money in little and often.”

Over ten years, the top performing UK All Companies fund is the four-star rated Slater Growth fund, which has returned 487.9% over that period. Also among the top performers is the Gold-rated Lindsell Train UK Equity, which has returned 407.2% and an annualised return of 17.7% over that time, according to Morningstar data.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk