In our previous newsletter, we explored why time in the market matters more than trying to time the market. A natural concern for any investor, however, is the risk of losses. In this newsletter, we take the analysis one step further by showing that, as the investment horizon increases, both the likelihood and the magnitude of losses decrease—and eventually disappear.
What We Analysed
We used daily data from the S&P 500 Total Return Index over the past 30 years (1 April 1996 to 1 April 2026). We then asked a simple question: what annualised return would an investor have achieved if they invested on any given day and stayed invested for a fixed period?
To answer this, we calculated the annualised returns for 1-year, 5-year, 10-year and 20-year periods (i.e. rolling returns) for every possible starting day over the past 30 years. This allows us to understand the range of possible outcomes depending on how long you stay invested.
- 1-year horizon: If you had invested on any of these days and held your investment for one year, potential losses or gains ranged widely from -47.5% p.a. to +77.8% p.a. From the sample of days tested, around 20% of those investment starting dates resulted in losses, while 80% resulted in gains.
- 5-year horizon: Outcomes improved, with potential returns ranging from -8% p.a. to +25.3% p.a. Approximately 17% of those investment starting dates still resulted in losses.
- 10-year horizon: Both the likelihood and extent of potential losses decreased. Returns ranged from -4.6% p.a. to +17.7% p.a., with only 9% of investment starting dates resulting in a negative outcome.
- 20-year horizon: All outcomes were positive, regardless of the initial investment date, and returns ranged from +4.0% p.a. to +11.3% p.a.
The analysis illustrates a fundamental principle of investing: while short-term volatility can be significant, the longer the investment horizon, the higher the probability of achieving positive returns regardless of when you invest—and the lower the risk of loss. For long-term investors, maintaining discipline by staying invested through market cycles, volatility and uncertainty has historically been one of the most reliable drivers of success.
The above represents the performance of S&P 500 Total Return Index over the past 30 years (1 April 1996 to 1 April 2026). Returns are presented on an annualised basis and are expressed in USD. The above analysis is intended to illustrate general investment principles and should only be used as an example. This analysis is based on historical data over a defined period and specific assumptions. Results are sensitive to the chosen timeframe, starting point, and methodology. As such, outcomes may differ under alternative scenarios. Past performance is no guarantee of future performance. Investment return and principal value may go down as well as up and could result in a significant loss of the capital invested.