And yet, over long periods, those who invest sensibly despite these wobbles generally benefit significantly from doing so.
Let’s take an example of three people, each investing £100 per month.
- Calm Carrie invests regularly each month.
- Nervous Nora only invests in months when the stock market is up compared to the previous month. In the months when she doesn’t invest, her money goes into cash and stays there.
- Yo-Yo Yasmine also only invests in months when the market is up on the previous month. However, her skipped contributions aren’t held permanently in cash. Once she restarts investing, she invests not just that month’s contribution but also any cash accumulated during skipped months.
We modelled how each of these investors would have performed between the start of 2000 and the end of 2025.
Calm Carrie is the clear winner. Over the 25-year period, her “keep calm and carry on” approach results in an investment portfolio worth just over £158,000. Given that she only invested £31,300, she has grown her money more than fivefold. Please remember past performance is not a reliable indicator of future returns.
Nervous Nora and Yo-Yo Yasmine have also squirreled away the same amount, whether into cash or investments. However, their outcomes are very different.
Nora ends up with around £50,000 less than Carrie. Her final portfolio of cash and investments is worth around £108,400. This reflects the impact of lower cash returns dragging down her overall portfolio.
But the worst outcome of all is Yasmine’s. She only has around £71,000 at the end of the period – almost £90,000 less than Carrie and almost £38,000 less than Nora. Even so, she has still more than doubled her contributions – showing the compounding power of investing even when you do so in a less optimal way.
| Total invested | Total ending balance | |
|---|---|---|
| Calm Carrie | £31,300 | £158,025 |
| Nervous Nora | £31,300 | £108,434 |
| Yo-Yo Yasmine | £31,300 | £70,943 |
Source: Fidelity International analysis using LSEG Workspace. Data from 1.1.00 to 31.12.25. Investment returns modelled using MSCI World Index. Cash returns modelled using SONIA.
Much of Yasmine’s problem comes because she is piling her money into the market at a time when stock prices are already higher. A key benefit of investing regularly through market highs and lows, like Carrie does, is that, when stock prices are down, you are buying at cheaper prices and should benefit from any subsequent recovery.
With Yasmine’s approach, she misses the opportunity to buy at lower prices.
This comparison demonstrates not only the drag of holding excess cash over long periods (Nora’s problem) but also the potential pitfall of panicking and holding back investments during times of uncertainty, only to pile back in when everyone else does.
The key takeaway is that, while stock market volatility is unsettling, staying the course by investing regularly can pay off.
In each case, we have assumed:
- They have £100 a month to invest or save
- Contributions to investments or savings happen on the first day of the month
- Investment returns are modelled using the MSCI World Index while cash returns are modelled using SONIA, an interest rate benchmark reflecting average UK bank rates
Maintaining composure and sticking with your investment plans is hardest during a major market crash. The pain of losing money in a downturn can impact people’s behaviour for decades after, putting them off investing permanently.
Our own Fidelity research found that UK household investment levels collapsed when the dotcom bubble burst and have never returned to their late 1990s highs.
History suggests the real cost of market downturns isn’t the fall itself, but the decision to step away and never return – a lesson underscored by the post-dotcom years, where many investors missed decades of recovery.
Behavioural science tells us that fear is loudest at market lows, and if it can diagnose the problem, it can also help to provide guidance on how to overcome it.
Potentially helpful lessons from behavioural science include:
- Adopting a rules-based approach to investing. Setting clear, pre-defined rules for how to act in different scenarios makes it easier to avoid following the crowd during market bubbles and panic-selling during short-term corrections.
- Building and maintaining a clear investment case for any investment. This can involve defining a rationale for each investment you hold, writing down its key assumptions, and revisiting them periodically. If you’re worried about falling markets, revisit your rationale: does it still hold?
- Relying on inertia. With Fidelity, you can automate your investments with a regular savings plan. This takes the decision about whether to invest or not each month out of your hands, blocking fear from holding you back.
- Not checking investments too often. Thanks to smartphone technology, we can now check our investment portfolio anywhere: in the supermarket, at work, in the bath. The risk is that you end up paying too much attention to short-term market movements, losing your focus on the long-term plan. Setting up a regular savings plan and pencilling in a review, say, once every six months can help to combat that risk.
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