Regular investing in the stock market can provide positive returns even where investors pick the worst moment to enter the market, according to new research by investment platform XTB.
Data analysis shows that over the last 10 years it would not have mattered whether a regular investor consistently entered the market at the very worst, or the very best, moment – both would have returned a profit.
To explore the power of regular investing XTB created two fictional investors. While both invested a fixed sum every year for 10 years, one suffered from terrible timing, entering the market at its peak each year. The other enjoyed immaculate timing buying into the market at its lowest point in the year.
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While the investor with perfect timing obviously did better, witnessing a 91% return over the period, their counterpart, despite suffering from the worst possible luck, still returned a respectable 52% profit.
Josh Raymond, Director of XTB, said: “These figures demonstrate the power of regular investing and how it can offer protection from a downturn in the market while also allowing investors to benefit from any gains. However, we have to accept that these fictional scenarios are just that, fictional. No one, no matter how lucky or unlucky, can consistently pick the top or bottom of the market.”
To explore a more realistic scenario XTB also analysed the returns that would have accrued from investing the same amount of money, over the same period, but doing so ignoring fluctuations and entering the market once a month, on the first day of each month. The data shows that this third investor would have generated a 67% return.
“The data demonstrates the old adage that time in the market is more important than timing the market,” Raymond explained. “Regular investing is a strategy that anyone can adopt, if they have the time and patience to let the market do the work. This is why we have created our Auto Investment Plans which allow customers to put fixed, regular sums into investments of their choosing, with zero commission.”
To create the research detailed above XTB looked at the returns traders would have accrued had they invested £12,000 each in the MSCI World ETF. Under the different scenarios the worst trader had £18,215 at the end of the period, the best trader had £22,972 while the trader who invested on a monthly basis had £20,022.
XTB is a global fintech company that provides individual investors with instant access to financial markets from around the world, through an innovative online investing platform and the XTB mobile app. Founded in Poland in 2002, we support over 847,000 customers globally in achieving their investment and trading ambitions.
