Time in the market – is it the best approach for long-term investing?
In long-term investing, it’s not about when you invest, it’s often about how long you stay invested. Time in the market, not timing the market, is considered by many a solid path to building lasting wealth.
For clarity, this article doesn’t offer a recommended approach. We are simply outlining the benefits of time in the market. Here’s why staying invested over decades could be one of the smartest financial moves you can make.
What are the benefits of time in the market?
In short, some of the reasons that time in the market is considered such a solid long-term investment strategy are:
- The power of compounding
- Smoothing out volatility
- Capturing the market’s best days
- Fewer emotional mistakes
- Building wealth & financial security
Related reading: Does time in beat timing the market?
1. The long-term power of compounding
Compounding is when your investment returns generate further returns over time. This effect accelerates dramatically the longer you stay invested.
The real secret to wealth isn’t extraordinary returns, it’s letting average returns work over extraordinary periods of time.
Example: How compounding returns build wealth over time
Imagine you invest £250,000 and leave it untouched for 25 years, earning an average return of 7% per year.
You don’t add anything. You don’t take anything out.
Here’s what happens:
- After 5 years: £350,570
- After 10 years: £491,710
- After 15 years: £689,480
- After 20 years: £966,340
- After 25 years: £1,355,000
That’s more than £1.1 million in growth, simply by staying invested and letting compounding do its thing. When it comes to UK savers and investors, ISAs and pensions offer many benefits for long-term investors. Tax relief on pensions, and tax-free divends on stocks and shares ISAs make them an incredibly effective investment.
Smoothing out volatility
Markets are volatile in the short term. However, history indicates they are reliable in the long term. By staying invested:
- Short-term noise becomes irrelevant.
- Temporary crashes fade into the background.
- The upward trend of human progress takes over.
Patience reduces the emotional impact of short-term price movements.
Examples: Smoothing out the bumps in the investment journey
Let’s say you invested the same £250,000 into a stock market tracker in the year 2000.
Over the first decade, your investment portfolio would have faced some significant bumps and challenges.
For example:
- The dot-com crash (2000–2002)
- The 2008 financial crisis
- Several periods of volatility in between
During those early years, the ups and downs might have felt like a rollercoaster.
If you stayed invested, through the noise, fear, and headlines, here’s what happened:
Over 25 years, the market recovered, grew, and compounded. That same £250,000, would have grown to over £1.3 million, assuming a long-term average return of 7% per year.
Capturing the market’s best days
Many of the market’s best days occur within weeks of the worst days. If you exit during turbulence, you are likely to miss crucial rebound rallies.
Missing just the 10 best days in a 30-year period would have a significant impact on the long-term investment outcomes, highlighting why staying invested is critical.
Four of the S&P 500’s Best Days
March 23, 2009
- Gain: +7.1%
- Context: Amid the depths of the 2008 financial crisis, the market rebounded sharply as investors anticipated the benefits of government stimulus measures.
October 21, 1987
- Gain: +9.1%
- Context: Following the infamous “Black Monday” crash, the market experienced a significant rebound, showcasing its resilience even after severe downturns.
March 13, 2020
- Gain: +9.3%
- Context: During the early stages of the COVID-19 pandemic, markets surged as the U.S. government announced substantial economic support measures.
April 9, 2025
- Gain: +9.5%
- Context: The market soared after President Trump announced a 90-day pause on tariffs for most countries, alleviating fears of an escalating trade war.
Source: List of largest daily changes in the S&P 500 Index (Wikipedia)
Reducing emotional mistakes
Emotional investors are prone to trying to buy high during euphoria and selling low during fear. To summarise, this is one of the main reasons individual investors underperform the market.
Altogether, time in the market reduces the temptation to react impulsively, and exiting the market and putting all your eggs into cash.
As a result, this could well help to keep you aligned with your long-term investment strategy. That said, it’s normal for human beings to consider their options during periods of market volatility and downturns.
Examples of the types of emotional investment decisions people make
1. Panic selling
Emotional investors often sell during downturns out of fear, locking in losses rather than staying the course and giving markets time to recover.
2. FOMO buying
Fear of missing out can lead people to chase the latest trends or invest in assets after they’ve already soared, often just before they fall.
3. Overreacting to news
Reacting impulsively to headlines or short-term economic data can result in poor timing decisions that disrupt a sound long-term strategy.
4. Holding onto losers (Loss Aversion)
Investors sometimes refuse to sell underperforming investments because they don’t want to accept a loss, even when it’s the rational choice.
5. Overconfidence
After a run of good results, some investors believe they can consistently beat the market, leading to excessive risk-taking and poor diversification.
Building true wealth over decades
Time, discipline, and consistency are often what create real wealth.
No risky trades. Unless that’s your thing.
No chasing fads. Unless you’re prepared for potential losses.
Just systematic investing, year after year, allowing the magic of compounding and market growth to work.
Wealth is not built overnight, it is built quietly, over decades.
Need a graph to help you see this for yourself?
- S&P 500 Index – 90 Year Historical Chart (MacroTrends)
Conclusion: The benefits of time in the market
Many people feel that time in the market beats timing the market, every time.
Long-term investing can reward those who:
- Stay disciplined
- Ignore short-term noise
- Trust the long-term growth of markets
If you want your future to be financially secure, the smartest investment move could well be starting early, staying invested, and never underestimating the power of patience.
Looking at the long term?
The best time to invest was yesterday.
The second-best time is today.
