Why time in the market matters more than you think

During times of market volatility, when headlines turn negative and portfolios dip, initial instinct is to act. But is it right?

The evidence suggests otherwise.

Analysis of global equity markets over the past 30 years shows that, despite significant periods of turbulence, the overall trajectory has been upward. The dot-com crash, the 2008 financial crisis, the pandemic selloff of 2020 - in every case, markets recovered. The critical variable in investor outcomes wasn't market behaviour. It was investor behaviour: specifically, whether they stayed invested long enough to participate in the recovery.

Investors remaining in global equities for five years experienced negative returns only 11% of the time. Extend that to 20 years, and the likelihood of a loss was close to zero. Short-term outcomes are inherently uncertain; long-term outcomes are considerably more favourable.

This is a useful reminder of why aligning investment strategy to time horizon matters - not just as a consideration at the point of initial suitability assessment, but as an ongoing conversation with clients, particularly during volatile periods when short-term thinking is most tempting.

Helping clients understand their true time horizon - and stay committed to it - may be one of the most valuable things an adviser can do.

Want the full evidence? Download our guide, An Evidence-Based Guide to Market Volatility and Investment Returns, for the complete data and analysis.

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This article is for intermediaries to be used for information purposes only. It does not constitute an offer or solicitation to invest, it is not advice or a personal recommendation, nor does it take into account the particular investment objectives, financial situation or needs of individual clients. Whilst HRIS uses reasonable efforts to obtain information from sources which it believes to be reliable, HRIS makes no representation that the information or data in this document is accurate, reliable or complete.

The value of investments and the income from them may go down as well as up and neither is guaranteed. Investors could get back less than they invested. Past performance is not a reliable indicator of future results. Changes in exchange rates and/or tax rates may have an adverse effect on the value of an investment.