Saving for retirement is not a short-term endeavour. It requires navigating the highs and lows of an unpredictable geopolitical and economic landscape. Yet amid this uncertainty, one enduring truth remains: the power of long-term investing.
History consistently demonstrates that disciplined investment strategies – particularly those anchored in equity markets – reward patience over panic. Whether facing inflation, interest rate fluctuations, or global instability, Australians who stay the course and resist the urge to time the market are often best positioned to grow and preserve their retirement savings.
Emotional investing
Market volatility can test even the most disciplined investors, often triggering emotional decisions to sell during downturns or buy during euphoric highs. To stay the course, set clear investment goals tied to your retirement timeline and automate contributions to avoid impulsive reactions. For instance, during the 2020 market crash, the ASX 200 dropped nearly 37% in a month, yet those who held steady saw a full recovery within a year. Working with a financial adviser can provide structure and discipline, helping you stick to a long-term plan regardless of market noise.
Time in the market beats timing the market
A long-term, buy-and-hold strategy generally outperforms frequent trading, as historical data shows the best days happen during market turmoil and periods of heightened market volatility. In missing the best days in the market, an investor risks losing out on meaningful return appreciation over the long run.
For example, per historical performance data for an S&P/ASX 200 ETF, STW (which tracks the S&P/ASX 200 Accumulation Index), a $10,000 investment from 2003 to 2022 would have grown to around $52,100. This reflects an annualised return of approximately 8.6%, accounting for dividends reinvested over the 20-year period. However, studies indicate that missing the 10 best days could cut the final value by more than half. Extrapolating this, for 2003–2022, the final value might drop to about $21,200, with an annualised return of around 3.8%, underscoring the importance of staying invested.
The role of compounding
The magic of long-term investing lies in compounding, where returns generate additional returns over time. For example, a 25-year-old investing $5,000 each year in a diversified portfolio earning 8% annually could amass over $1.1 million by age 65. In contrast, starting at age 35 reduces the final amount to around $470,000. The earlier you start, the more time compounding has to work, making it critical to begin investing as soon as possible, even with small amounts. This reinforces the importance of staying invested for the long haul.
In summary, disciplined buy-and-hold investing in a diversified portfolio has historically outperformed frequent trading. Over the past two decades, the ASX 200 and S&P 500 each delivered roughly 8–10% annualised return. Trying to time entries or exits often means missing those best days and sacrificing most of those gains. Instead, time in the market – along with strict diversification and a steady strategy – taps the stock market’s long-term upward trend. For patient investors, the cost of timing mistakes is simply too high.
The next step
To start your long-term investing journey, take small, consistent steps. Review your superannuation or investment fund’s investment options to ensure they align with a diversified, growth-focused strategy.
Published 6 August, 2025