The Chances of Long-Term Investment Returns

Pacome Breton


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Investing is widely considered a long-term game. Short-term losses can prick your emotions — no-one likes to see their portfolio go down in value — but staying in the market and resisting the temptation to tinker can pay off in the end.

“A 94% chance of positive returns?”

Looking at global stock market data between January 1971 and December 20211, if you had randomly picked one day during this period and chosen to invest just for that one day, you would have had a 52.5% chance of making gains — almost a similar odd to the toss of a coin.

Long-term investing dramatically increases your chances of returns. Just weeks more in the market can make a considerable difference.

If you had invested your money for a quarter, or 65 days, during that same 49-year period, your chances of making a profit increased to 66.1%. Investing for any one year would have generated a positive return 72.7% of the time, while investing for ten years increased your chances to 94.15%.

Source: Macrobond; MSCI World Equity Mid and MSCI Large Cap Total Return in GBP, 1 January 1971-6 Dec 2021 

These findings make for pretty interesting reading – compelling even. But remember, past performance is not a guarantee of future performance.

Time in the market, not timing the market

The longer you invest, the less likely you are to lose money. It’s as simple as that. Looking at data from developed equity markets between 1971 and 20212, your chances of suffering a loss go down over time.

As shown in the chart below, no matter when you invested during this period, long-term investing dramatically increased your probability of avoiding losses.

Source: Macrobond; MSCI World Equity Mid and MSCI Large Cap Total Return in GBP, 1 January 1972- December 2021 

Clearly, the first year can be stressful because a year in isolation is more likely to show losses than a longer timeframe. This is when anyone new to investing may feel stressed about the ups and downs in financial markets. 

The likelihood of making a loss should go down over time, and so too can those feelings of anxiety – particularly as you grow familiar with the natural ebb and flow of market prices. 

What might seem like a big movement one day is but a blip when viewed over several years. 

Risk warning 

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future performance. 

Sources 

[1/2] Macrobond; MSCI World Equity Mid and Large Cap Total Return in GBP, 1 January 1971-20 December 2021 

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Pacome Breton
Pacome is an investment manager and head of risk at Nutmeg with more than ten years' experience in investment and risk management. He previously worked for a US family office and a large European asset manager and started his career at Société Générale in Tokyo. He holds an MSc in quant finance from Bocconi University in Milan and is a certified financial risk manager and chartered alternative investment analyst.

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