Asset allocation

The '£17,808 cost' of mistiming your investments

When markets fall the natural instinct is to sell. Our research highlights how costly it can be to miss the stockmarket’s best days.

19/03/2018

David Brett

David Brett

Investment Writer

Schroders

Buying low and selling high is every investor’s goal. However, timing the market precisely is notoriously difficult, if not impossible.

Research undertaken by Schroders shows how costly it can be when the timing is wrong.

Over three decades, mistimed decisions on an investment of £1,000 could have cost you nearly £18,000-worth of returns.

Our research examined the performance of three indices that reflect performance of the UK stockmarket – the FTSE 100, the FTSE 250 and the FTSE All-Share.

If in 1987 you had invested £1,000 in the FTSE 250 and left the investment alone for the next 30 years it would now be worth £24,686. (Bear in mind, of course, that past performance is no guarantee of future returns).

However, if you had tried to time your entry in and out of the market during that period and missed out on the index’s 30 best days the same investment would now be worth £6,878, or £17,808 less.

In terms of annualised returns, over the last 30 years you would have made:

  • 11.3% if you stayed invested the whole time
  • 9.3% if you missed the 10 best days
  • 7.9% if you missed the 20 best days
  • 6.6% if you missed the 30 best days

The 2% difference to annual returns between being invested the whole time and missing the 10 best days doesn’t seem much but the effect builds up over time, as shown in the table below.

UK stocks investment returns since 1987

IndexReturn on £1,000 over 30 yearsLess the 10 best daysLess the 20 best daysLess the 30 best days
FTSE 250 £24,686 £14,456 £9,750 £6,878
FTSE All-Share £13,320 £7,124 £4,637 £3,168
FTSE 100 £12,989 £6,691 £4,238 £2,833

Source: Schroders. Thomson Reuters Datastream. Data shown is for total return indices, which include dividend payments, between 23 October 1987 and 23 October 2017. Past performance is not a guide to future returns.

When observing returns over long periods, investors should also bear in mind that markets can be volatile, with many ups and downs during the timespan.

Author

David Brett

David Brett

Investment Writer

Schroders

This article is issued by Cazenove Capital which is part of the Schroder Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.

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