Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 138

Long-term investing: the destination is better than the journey

The old adage ‘time in the market, not timing the market’ is frequently used in articles like this one, with good reason – it often holds true. One of the key elements of successful investing is patience, as a long-term mindset is required to achieve investment goals. Returns in the short-term can be unpredictable and volatile, so investing with a short-term focus produces difficulties and can be counterproductive. It is easy to be fixated on the daily market movements and become distracted from long-term investment goals. It is often better to take a step back and allow investments to grow steadily over time.

Returns over different time horizons

To highlight the merits of having a long-term perspective, we assessed the historical returns after fees and tax of a ‘balanced’ superannuation strategy over three distinct time intervals: rolling one-month, rolling one-year, and rolling 10-years.

Exhibit 1 shows the rolling one-month returns or the portfolio's individual month-to-month performance. The green bars above the x-axis represent positive performance and a gain in the portfolio's value. A red bar below the x-axis represents negative performance and a loss in the portfolio's value.

There are no clear patterns or sequence to the returns. In the short-term, even a well-diversified portfolio exhibits volatile and unstable returns.

Exhibit 2 illustrates the rolling one-year returns, so each bar includes 12 months of performance.

Here we observe smoother and more persistent positive returns over time, with less frequent periods of negative performance.

Exhibit 3 depicts the balanced portfolio's returns over rolling 10-year periods and each bar accounts for 10 years of performance. The benefits of long-term investing become apparent, with two important takeaways:

  • In this period, there are no periods of negative returns, which means that no matter what 10-year period an individual was invested over, the portfolio delivered positive performance. This is because the well-diversified balanced strategy recovered from any losses or periods of underperformance within each 10-year window.
  • The returns are significantly smoother and considerably less volatile compared to shorter time horizons. Investors can see past the haze of short-term market movements and focus on achieving long-term investment goals.

Peter Gee is Research Products Manager with Morningstar Australasia. Information provided is for general information only, and individuals should seek personal advice before making investment decisions. The objectives of any individual have not been considered in this article.

 

8 Comments
Phil Bamback
January 04, 2016

Well said Terry... even though nothing more needs to be said I felt this was needed :)

Terry McMaster
December 12, 2015

This article shows that there can be an inverse relationship between the number of words, very low, and both the quality and quantity of information, very high.

The graphics tell the tale beautifully.

In summary, investing in shares and property is a long term exercise and if you are not prepared or able to take a long term view, ie at least ten years, then you should not invest in shares or property.

Nothing more needs to be said.

Peter Vann
December 11, 2015

Hi Brian S

1) Another way to address your desire for more research is in

http://ccfs.net.au/cvs/content/Impact_of_Investment_Risk_onRetirement_Income.pdf

In this white paper the authors** derive sustainable retirement income estimates as a function of the aggressiveness of their asset allocation for three specific cases. These calculations account for investment (and inflation) volatility (for the technical it uses a stochastic analysis not the simple but misleading deterministic analysis) .

Whilst these are only 3 specific cases, the nature of the conclusion seen on page one applies for many general cases.

2) Sure, Peter Gee's analysis is based on history, whereas in reality we all need to undertake forward looking analysis. But forward looking analysis uses history as a guide, plus current market conditions and expectations (not in the statistical sense) of future return generating parameters. Hence Peter's work provides useful insights for that forward looking process.

Peter Vann

Peter

** Chris Condon and myself.

Brian S
December 10, 2015

There is nothing new here and for those in the superannuation accumulation phase it should be reassuring. For those of us in the pension phase with drawdowns of 5% per annum or more a "balanced" portfolio may be too agressive but there is little published material showing how our investments would perform over various time spans and with different asset allocations.

David
December 10, 2015

Why on earth would any investor be in commodity stocks, just as one example, over the last 3 years?

Jon B
December 10, 2015

The trouble is institutionalised laziness and the insistence that tracking error is more important than negative returns. Constructing actively managed, diversified portfolios from managers that hate to lose investors money makes a monstrous difference to investor performance. All the above article proves is that there are "lies, damned lies, and statistics".

Jerome Lander
December 10, 2015

Unfortunately, this is a simplistic view of markets based on looking in the rear view mirror, and with no elucidation of what the drivers of the returns have been, and how these might have changed and be different in future.
I would hate for anyone to rely upon this sort of analysis to invest their money, as depending upon the starting point they could easily have a very disappointing result.
Would you consider the following a good investment result:
Return: 5% per annum (over 10 years)
Risk: Biggest draw down 30-40%
Most people wouldn't, and nor should they! Alas, this is the sort of result they could achieve if they started today, and didn't lose their nerve in the meantime...

Gary M
December 10, 2015

“Patience” is fine if you are happy you have bought great businesses at great prices and are not worried that maybe you haven’t; and if you have great confidence that your existing investments will definitely achieve your goals when you need to them to; and if you know for sure that you won’t panic when your passive portfolio falls 50% or more. For everybody else (99% of investors) there is little reason to be patient.

 

Leave a Comment:

RELATED ARTICLES

How likely are market crashes?

Hold fire on your fund manager over short-term declines

Bigger fall, bigger bounce: small caps into and out of recessions

banner

Most viewed in recent weeks

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Latest Updates

Investment strategies

4 ways to take advantage of the market turmoil

Every crisis throws up opportunities. Here are ideas to capitalise on this one, including ‘overbalancing’ your portfolio in stocks, buying heavily discounted LICs, and cherry picking bombed out sectors like oil and gas.

Shares

Why the ASX needs dual-class shares

The ASX is exploring the introduction of dual class share structures for listed companies. Opposition is building to the plan but the ASX should ignore the naysayers and bring Australia into line with its global peers.

The state of women's wealth in Australia

New research shows the average Australian woman has $428,000 in net wealth, 40% less than the average man. This takes a deep dive into what the gender wealth gap looks like across different life stages.

Investing

The two most dangerous words in investing

Market extremes are where the biggest investment risks and opportunities lie. While events like this are usually only obvious in hindsight, learning to watch out for these two words can alert you to them in real time.

Shares

Investing in the backbone of the digital age

Semiconductors are used to make microchips and are essential to a vast range of technology and devices. This looks at what’s driving demand for chips, how the industry is evolving, and favoured stocks to play the theme.

Gold

Why gold’s record highs in 2025 differ from prior peaks

Gold prices hit new recent highs, driven by a stronger euro, tariff concerns, and steady ETF buying – all while the precious metal’s fundamental backdrop remains solid amid a shifting global economic landscape.

Now might be the best time to switch out of bank hybrids

In this interview, Schroders' Helen Mason discusses investing in corporate and financial credit securities, market impacts of tariffs, opportunities for cash investments, and views on tier two and hybrid bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.