At no time since 1900, if you invest in the ASX index for 10 years would you lose money!

Have you heard the saying “ Time in the market not timing the market”?

Lots of people say this and it has become a bit of a cliche. I decided to analyse the numbers to show the minimum and maximum returns of different investment horizons since 1900 (as far back as I could reliably find).

Results below:

20191024 time on the market image.PNG

The results are fascinating indeed. A few observations:

  1. Investing for one year in the ASX is a risky venture. You would make anywhere from a 67% gain to a 40% loss. This is akin to gambling in my books.

  2. If you invest in the ASX index for any 10 year period since 1900, the LEAST you would have made annually is 6.8%. There has NEVER been a 10 year period where you would have made a loss.

  3. If you invest in the ASX index for any 30 year period since 1900, the LEAST you would have made annually is 10.8%.

  4. If you invest in the ASX index for any 50 year period since 1900, your annual return would have been between 11.3% and 15.8%..

  5. The average return since 1900 is 13.2%

  6. Have a look at the standard deviation (the green line). In the 1 and 2 year horizon this number is massive. However once you approach the 50 year horizon, it is close to 1%.


In my not so humble opinion, here are my top 10 tips for investing:

  1. Invest in index funds

  2. Make regular contributions

  3. Only contribute money that you will not need for consumption (e.g. investment horizon of forever). This mindset will also assist you in the years when the market drops 40%! Also if you don’t sell, you will not have to pay any capital gains tax (and the compounding effect of having more money invested will work for you)

  4. Live off the income and don’t touch the capital

  5. Minimise transaction costs (I use SelfWeath at $9.50 a trade for any size trade - and they offer five free trades for new members)

  6. Minimise management fees. There are some great low cost index options these days like VAS and A200 (A200 has a management fee of 0.07% or $70 a year for every $100,000 invested). There are plenty of interesting articles about the massive difference to your capital balance between low and high cost investment options.

  7. Minimise the amount of time spent managing your portfolio (e.g. buy once a month). The opportunity cost of investing significant time managing your shares is the lost income from working / running your business.

  8. Diversify to smooth returns (industry / geographical / asset class etc). The ASX is small compared to global markets. Consider investing in global ETF’s.

  9. Against popular opinion, leave some funds in high interest cash. This will not optimise your return, however will provide you with peace of mind for living expenses, investment opportunities, unexpected expenses.

  10. Taxes can be a killer. Make sure you speak to a great accountant to determine the best structure to invest through (depending upon your circumstances a discretionary trust could save you thousands over the long term).


What do you think about the results of the study?

What do you think about the plan?

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