In this way you won’t lose any money on the stock market in the long term

On the stock market, the following applies: the longer you invest your money, the better. Historical data exclusively available to t-online show why you can hardly make any losses.

Speculate, gamble, bet: there is still a widespread belief that the stock market is all about quick money. About money that just melted away like won if you don’t know a lot about trading stocks.

But is that actually true? Is the risk of loss really that great when investing in stocks? Or is it not possible to build up capital in the long term on the stock exchange?

A new study by the Wikifolio trading platform, which is available exclusively to t-online, provides answers – at least with a view to the past. The risk of losing all of your money fell to almost zero the longer you invested. The most important requirement: a broad equity portfolio in which you regularly invest money through a savings plan.

Note: You cannot draw any conclusions about future price developments from the previous course. How stock market prices develop depends on numerous factors, which is why the course cannot be foreseen.

Wikifolio has a savings plan simulation based on historical price developments for the study of the German stock index (Dax 30) and the larger US index S&P 500 created since 1970. The data from the Dax, which was only founded in 1988, is partially calculated back. With the much older S&P 500, it is the actual price development. The study shows how likely it is to have earned a certain percentage of income after a fixed investment period.

The most important results at a glance:

  • The longer you invest, the less likely you are to lose money investing.
  • The longer you invest your money, the less important the entry and exit times for investments.
  • The wider you spread your investment, the lower your risk of losing money.

Specifically, using the Dax as an example, this means for any five-year period since 1970: the probability that you would have made losses in the past with a share savings plan is 12.9 percent – a total loss was even impossible:

If you had invested 15 years instead of five, the probability of loss was only 0.2 percent, as the following graphic shows:

“It looks even better with the even wider S&P 500,” explains Wikifolio boss Andreas Kern. “Anyone who has regularly invested money in the 500 most important US stocks with a savings plan for any five years has only made a loss with a probability of 9.6 percent.”

During the 15-year period, the risk of loss for the S&P 500 was just under 0.5 percent, as low as for the Dax. Conversely, however, it was much more likely that a savings plan would generate higher profits in any 15 years.

Invest broadly with index funds

Sebastian Külps, head of Germany at asset manager Vanguard, knows how important a broadly based equity portfolio is: “Many people lack a basic understanding of stocks: if you invest widely, you minimize your risks.”

The easiest way to do this is with a so-called ETF, also called an index fund, which experts from the consumer protection center recommend. This replicates an entire stock index. You therefore invest in all companies that are listed in the index. In the case of the Dax, that would be companies like SAP, BMW or Henkel; in the S&P 500 the largest companies are Apple, Amazon and Alphabet (Google).

“ETFs are indeed an investment for the people, for each of us,” says the economist and bestselling author Gerd Kommer, who is known as the “ETF Pope”. Direct banks on the Internet offer this ETF savings plans at. With these, you invest a small amount in an ETF every month. You can often control the savings plan with your smartphone or tablet.

Returns with ETFs are handsome

The yields that could be achieved in this way are impressive. An example based on the Wikifolio calculations: We assume that you have invested 100 euros every month in an ETF on the S&P 500 for any 15-year period between 1970 and 2020.

In that case, there was only a 0.5 percent probability that you would have hit a period in which you would have made losses. Instead, in the majority of the cases, 39.7 percent of all possible time frames, you would have had a total return of 200 to 500 percent. That would be an average annual return of 7.6 to 12.7 percent.

In absolute numbers, you would have earned between 14,886 euros and 32,593 euros alone. Together with your deposits of 18,000 euros, you would have made a profit of almost 33,000 or more than 50,500 euros in the end.

The compound interest effect ensures high yields

“You can’t really go wrong for 20, 30, 40 or 50 years,” says Kommer. The reason for this development is the so-called compound interest effect. In short: Your invested money increases all the more when income that was previously generated is added and immediately reinvested. The longer the investment period, the more the effect pays off.

This can also be seen from the Wikifolio calculation: If you had paid into a savings plan on a monthly basis in any 40-year period between 1970 and 2020, you would have in most cases – 97.7 percent of the possible periods – a total return of more than 1,000 percent achieved. That corresponds to an annual return of more than 6 percent.

Or expressed in absolute numbers: If you had invested 100 euros for 40 years, you would have deposited a total of 48,000 euros. In the end, however, a significantly higher sum comes out: 200,318 euros – of which more than 150,000 euros in income.

About the method: The simulation is based on the average annual returns. There are periods in which the actual returns can differ greatly from the average annual return, which can also have an impact on the compound interest effect. The costs for the savings plan, possible taxes, as well as inflation and currency effects were not taken into account.

Get on sooner rather than later

A central finding of the analysis: the exact time of entry on the stock exchange is almost irrelevant in the long term. The only important thing is to persevere when investing. On the other hand, you should be a little more careful when you exit:

Anyone who depends on the money invested shortly after the sudden collapse of the markets, for example because retirement is approaching, can also be unlucky. It can therefore be worthwhile to gradually sell your own portfolio shortly before such a point in time.

However, investors should not be afraid of such scenarios, as Vanguard manager Külps emphasizes. “Shares have a risk,” said Külps in an interview with t-online. “But you can benefit from this over a long period of time – with a higher return.” Kern adds: “Shares are the most democratic investment there is.” Nobody should therefore fear it.


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