Recent economic instability, both domestically and globally, has increased the challenge for those wishing to invest or save.
Planning ahead can be difficult in the face of market volatility and economic uncertainty, but long-term investing remains one of the most reliable ways to reduce risk and build wealth over time.
Backed up by numbers
Investing for the long term is a proven approach to building wealth and it is backed up by some fairly impressive numbers:
- Global stock markets have delivered around 8-12 per cent average annual returns over the long term between 1926 and 2025
- UK equities (FTSE 100) have returned around 6.3 per cent annually over the last 20 years
- Over 125 years, global equities delivered 5.2 per cent real returns, far outperforming bonds (1.7 per cent) and cash (0.5 per cent)
- Even over a shorter 25-year period, stocks and funds have underperformed cash only 0.8 per cent of the time
While it may be tempting to chase quick wins, if you want reliable returns, then you need to consider your investments over a longer period.
Why this beats uncertainty
If the numbers didn’t already give some indication of the benefits of long-term investment, then consider that specific uncertainties, such as global conflict, rarely last for long periods of time.
This means that market shocks generally have limited long-term impact on investment, with prices often reverting over time as the situation recovers.
We rarely see markets deliver their average return in any one year, which just goes to show short-term unpredictability doesn’t indicate long-term risk. Growth takes time and patience can be key to building wealth for your future.
If you are waiting for the perfect entry point into a fund or market, then you should be aware that stock markets have been at all-time highs around 31 per cent of the time since 1926.
Holding cash and waiting for when the market is highest may mean that over time you miss out on cumulative growth.
Long-term investing succeeds because it allows compounding to work over time while reducing the impact of short-term market swings.
It also helps you to avoid emotion-driven decisions, while long-term planning can enable you to capture overall economic growth.
Be aware that losses can and still do occur, even when you are investing over longer periods, which is why it is best to seek independent professional financial advice.
Building greater resilience in the short and mid-term
Whilst investing your money over a longer period is often recommended, in the short to medium term, you should also create resilience in your wealth plan.
One of the most effective ways of doing this is to diversify your investment across different regions and asset returns, which can help to improve returns and reduce risk.
Diversification is a more reliable strategy, regardless of how long you intend to invest your hard-earned money.
Need guidance on long-term investment?
Uncertainty is unavoidable, but long-term investing is one of the most effective ways to manage it as you build wealth throughout your life.
If you would like guidance and support on your savings and investments, please speak to our team.