Even investors who bought at the worst possible moments over 25 years still more than tripled their money
One of the most common fears investors face is putting money into the market today, only to see asset prices fall significantly tomorrow.
It’s understandable; when headlines are dominated by war, tariffs, inflation risks and AI spending concerns – as has been the case in recent weeks and months – it’s natural for investors to second-guess whether now is the right time to invest.
For many Australians, that uncertainty leads to analysis paralysis. Some delay investing altogether, waiting for a so-called “better time”. Others move to cash after markets fall, telling themselves they’ll get back in when things feel calmer while crystallising real losses in the process.
In all cases, the instinct is the same: avoid the pain of losing money, even if it’s on paper.
But history, along with decades of market data, teaches us something important: even investors with the worst luck in market timing have been better off staying invested than staying out.
Vanguard recently tested the notion of bad luck in an investing context by examining the returns made by a hypothetical investor who managed to put money into the market during three of the worst moments in recent history. Let’s call him Unlucky Steve.
Steve invested $10,000 in a diversified global equities portfolio, represented by the FTSE All-World Index, just before the internet bubble burst in 2000. He then invested another $10,000 immediately before the global financial crisis of 2008, and a final $10,000 ahead of the COVID sell-off in 2020.
It is hard to imagine worse luck – after making these investments, equity markets declined by at least 20 per cent. Yet Steve held on through every crash, every recovery, every negative headline and every new market high over those 25 years.
By the end of last year, Steve’s $30,000 of invested capital grew to $117,017 before fees, taxes and transaction costs and assuming all dividends were reinvested — a return of 7.6 per cent per annum. Had he stayed in cash instead, his portfolio would be worth $54,165, equivalent to annual growth of only 3.4 per cent.
What makes this even more powerful is everything that happened in between those crises: 9/11, the Iraq War, Enron’s collapse, repeated bank bailouts and failures, the European debt crisis, US credit rating downgrades, a pandemic, and years of recession fears and interest rate shocks.
Unlucky Steve’s experience highlights that even with the worst possible timing, investors who remain invested through market downturns have generally achieved better long-term outcomes relative to those who take no risk.
Because the reality is that accurately calling market highs and lows is extremely challenging. Attempts to delay investing or move to the sidelines often mean missing periods of recovery.
Staying the course in markets is not about ignoring risk. It’s about recognising the difference between short-term volatility and negative headlines versus long-term wealth creation.
This is reinforced by the latest Vanguard Index Chart, which shows returns for major asset classes have been positive across 10, 20 and 30-year periods.
Specifically, over the three decades to June 2025, Australian shares delivered 9.3 per cent per annum, while U.S. shares returned 10.8 per cent annually, and global shares 8.3 per cent annually. Even Australian listed property and fixed income provided 8 per cent and 5.5 per cent per annum, respectively.*
When we consider the data, Unlucky Steve shows us even the poorest entry points are consistently overcome by being patient and giving investments the time needed to recover and compound.
The real challenge is ensuring your portfolio is built to withstand the natural volatility that comes with investing by focusing on the elements you can control: setting clear goals, establishing an appropriate asset allocation, maintaining broad diversification, staying disciplined and keeping costs low.
For Australians navigating what seems to be an endless barrage of negative headlines, the key takeaway from this exercise is straightforward. The real risk is not investing at the wrong time – it’s never getting started at all.
Important Information
The Unlucky Investor Steve example is for illustrative purposes only and is not intended to estimate or predict returns from investing in any particular investment, asset class, product or index.
Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance.
*Returns taken from the Vanguard Index Chart. Per annum total returns to 30/06/2025. US shares = S&P 500 Total Return Index (in AUD), Australian Shares = S&P/ASX All Ordinaries Total Return Index, Global shares = MSCI World ex-Australia Net Total Return Index AUD Index, Australian listed property = S&P/ASX 200 A-REIT Total Return Index and Fixed income = Bloomberg AusBond Composite 0+ Yr Index.
Source: Vanguard
This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™
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