Time in the market - not timing the market

The FTSE All-Share index is made up of over 600 listed UK companies in all sectors of the economy. Here you see the return on a £100 investment over the thirty year period, had you remained invested throughout. The returns are shown on a total return basis, with net income reinvested.

Over the thirty years, the long-term trend in UK equities has been strongly positive, reflecting significant growth in the UK economy. However, there has been significant volatility and you can see that the market has fallen sharply and taken a long period to recover on a number of occasions.

Please remember that past performance is not a guide to future performance and may not be repeated.

Many investors will not hold an investment for as long as thirty years. People put money in, and take money out of the market, at different times for many different reasons. So it is useful to look at returns over different periods, starting at different times, to get a better understanding of the range of outcomes that an equity investment may deliver.

The chart below shows you the minimum, maximum and mean (average) returns achieved by investors over different periods, ranging from one week to twenty years starting at different weekly intervals.

Over the thirty year period, there were a total of 1,566 periods of one week’s duration, 1,047 periods of ten years’ duration and 527 periods of twenty years’ duration.

You can see that investing for the same period of time from different start dates can generate very different returns. For example, while investing over three years would on average have delivered a return of £29.35 on a £100 investment, at best you could have more than doubled your money while at worst your investment could have fallen in value by £42.16 to £57.84. Over the various time periods shown, you can see from the purple bars that the maximum loss you could have made over any time period becomes greater up to the three year holding period mark and then begins to decrease.

This supports the adage that ‘time not timing’ can be more important when investing in equities.

Short-term swings in valuation can be driven by unpredictable changes in sentiment and markets suffer occasional extreme shocks from events such as the global financial crisis and Covid-19. However, given time, economies are adept at adapting to shocks and tend to revert to a growth path, supporting renewed progress in equity prices over the long term. Over the thirty years, all investors in the FTSE who held investments for fifteen or twenty year periods made a positive return, irrespective of when their holding period began.

Return on £100 invested

The three charts below show the distribution of the returns received by investors on £100 invested over the thirty years for all one, five and ten year periods. In each case you can see that a small percentage of investors experience returns that are close to the low or high extremes (at the far left and right of each chart); most receive a return somewhere close to the middle of the range of returns for the time period.

Over longer time periods, you can see that the range of returns moves to the right, indicating a higher average return and a smaller proportion of investors losing money. Over one year periods, investors made a loss 25.9% of the time, over five year periods 12.3% of the time and over ten year periods only 1.2% of the time.

This shows the potential benefit of holding equity investments for the longer-term to reduce the risk of losing money.

Important Information

This document is marketing material. It is provided by the author and may not necessarily represent views expressed in other Aspect8 communications, strategies or funds.

- All the data in this article has been sourced from Financial Express, Schroders 2020 (weekly data).

- It is not intended as an offer or solicitation for the purchase or sale of any financial instrument.

- It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations.

- Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions.

- Past performance is not a guide to future performance and may not be repeated.

- The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

- All investments involve risks including the risk of possible loss of principal.

- Information herein is believed to be reliable but Aspect8 does not warrant its completeness or accuracy.

- Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions.

- Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties. This does not exclude any duty or liability that Aspect8 has to its customers under any regulatory system. Third party data is provided without any warranties of any kind. The data provider and issuer of the document shall have no liability in connection with the third party data.


This content is issued by Aspect8 Limited, registered address: Holmwood, House, Broadlands Business Campus, Langhurstwood Road, Horsham, West Sussex, RH12 4QP, number 07572431. Aspect8 Limited is a member of Best Practice IFA Group Ltd which is authorised and regulated by the Financial Conduct Authority FCA No. 227247.


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