Schroders Unit Trusts Limited: “We looked at the FTSE All – Share Index, the broadest measure of the UK stockmarket, over the past twenty-five years. We then filtered the data to show the 20 greatest one day falls and looked at what happened over the days and years that followed.
On the worst day, in the depths of the financial crisis on 10 October 2008, investors lost 8.3%. However, one year later the index surged and investors made 26%, including income paid through dividends. After three years the total return was 41% and after five years was 87%.”
See the table below. Source: Financial Express, Schroders, June 2016.
Past performance is not a guide to future performance and may not be repeated.
The benefits of staying invested: 60% return vs 5% loss
Trying to move in and out of markets, to call the top and the bottom, is exceptionally difficult. And, if you get your timing wrong, this can have a damaging effect on returns.
Consider this example. If you had invested in a basket of global equities investments in global stock markets – the MSCI World index – between 2005 and 2015 you would have received a return of 60%.
But if you missed the 10 best days within that period then you would have lost 5%, according to Financial Express data compiled by Schroders. It’s an extreme example but demonstrates the risks of trying to time markets. Source: Financial Express, Schroders, June 2016