Focus on the horizon

3rd September 2020

Investors will understandably be pondering their portfolios as economic challenges endure. You may have heard the age-old investment dictum – time in the market, not timing the market. If so, recent research1 has explored the concept, with some very compelling results.

In March 2000, during the height of the dot-com boom, if an investor made an investment of £1,000 in the average investment company and reinvested the dividends, the original investment would have been worth £3,665 as at 6 April 2020, a return of 267%, (here ‘investment company’ includes investment trusts and other closed-ended investment companies but excludes venture capital trusts and 3i Group plc.) This 20-year period includes the dot-com crash, the global financial crisis and the more recent COVID-19 related market falls.

Commenting on the findings, Annabel Brodie-Smith of the Association of Investment Companies said: “The bursting of the tech bubble and the global financial crisis saw huge falls in markets… However, investors who were able to stay invested or even invest during the downturn would have been richly rewarded over the long term. No one has a crystal ball, but these returns show the power of long-term investment and why it can often pay to have one eye on your portfolio and the other on the horizon.”

1AIC, April 2020

The value of investments can go down as well as up and you may not get back the full amount you invested.