Moneywise has long warned savers to ride out market volatility by investing for the longer term, and new research by AXA Self Investor proves why it can be so important.
The investment platform assessed the 10-year performance of the FTSE 100 – an index of the 100 largest companies on the London Stock Exchange - on a rolling monthly basis since February 1996.
During this period, it found that the index generated a positive return 95% of the time, producing an average total return of 69.57% over the 10 years, with the largest return at 154%.
Of course investing doesn’t come without risk, and unlike cash savings, your initial outlay can decrease as well as increase – there are also fees to consider.
See our Beginner's guide to investing for the basics.
But AXA says there were only six out of 120 occasions where investors would have lost money over a 10-year period, with the biggest loss at 14.5%.
‘Investing for the long term is the wisest course of action’
Adrian Lowcock, head of investing at AXA Self Investor, says: ““Only if you had bought during the dot com bubble and subsequently sold at the lowest point 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.
“The statistics demonstrate 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 week markets can swing back just as quickly as they fall.”
Three tips for successful long term investing
AXA’s three top tips for investors are to:
- Stay calm. Only make investment decisions when you are calm and rational. 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.
- Buy when others are selling: When everyone is selling, think about filling your annual individual savings account (Isa) or self-invested personal pension (Sipp) allowance when prices should be cheaper.
Read our guide on how to Invest for success in 2016.