This week saw the beginning of Wimbledon and we can all agree that Roger Federer is among the world’s greatest ever tennis players. What made him so successful is that he won over 80% of the more than 1,500 matches he played throughout his career. But what you might not know is that he only won about 54% of the points within those matches. At the top level, there are very fine margins between winning and losing, and despite setbacks within a game, it’s persistence that pays off in the long run.
The same is true in investing, it’s sticking at it that’s important. Successful investors take the inevitable setbacks in their stride and carry on. They focus on the fundamental reason we invest, which is that while there are no guarantees, history shows that over time stock markets tend to increase in value. They don’t go up in a straight line, but the long-term trend over the decades is positive.
This week’s chart highlights how over the past 44 years the average maximum fall by global equities (represented by the MSCI World index) in any given year has been 14.6%. But from these lows they have bounced back to deliver positive returns in 33 out of 44 years, so 75% of the time. Much like in tennis, the key is to persist, despite the setbacks.
History has shown that the odds of achieving a positive return increase dramatically when you have a longer time horizon. The odds of a positive return when investing in markets on any given day are just over 50%. However, if you stay invested, the odds of success are dramatically higher.
In short – In investing, and life in general, persistence pays off.
Logic Wealth Planning provides independent financial advice in Manchester, Bury, Rochdale, Cheshire, and the surrounding area, but not limited to the region.