Is there a perfect time to enter the equity market?

By James Purcell, Head of Client Solutions

• Equity market volatility and short‑term declines are uncomfortable but common, and history shows that negative returns can precede long‑term periods of subsequent growth.
• Our analysis highlights that an ‘unlucky investor’ who repeatedly invests just before market downturns could still significantly outperform cash over time.
• In our view, disciplined investing, time spent in equity markets, and sticking to a long‑term plan matter more than perfect timing.

Markets are fast-paced and forward-looking, so they often react to news. Amid escalating events in the Middle East, global equities delivered a return of -5.4% (in sterling terms) in March 2026. This was understandably uncomfortable for many investors.

However, declines of this magnitude are not uncommon. In fact, over the past 25 years, a monthly return of -5.4% or worse has occurred in 23 separate months (some years haven’t had any months like this, others have had more than one) – a reminder that equity investors experience both downturns and upswings.

Despite the discomfort, even sizable monthly declines have not historically resulted in permanent losses for investors able to wait out the turbulence. Roughly speaking, a lump-sum investment of £250,000 in a global equity index at the start of 2001 could now have grown to an impressive £1.6 million – a return of over 500%. For ease of illustration, this (like all the examples in this article) is a hypothetical calculation using index values, making a number of assumptions, and not including management fees or other charges.

But while investing could grow and compound wealth, a fear of poor market timing – investing just before a large sell-off – can deter some people from getting started. To examine this dynamic, we have constructed an exercise that we term the ‘unlucky investor’.

The value of investments, and the income from them, can fall as well as rise and you may not get back what you put in. Past performance should not be taken as a guide to future performance. You should continue to hold cash for your short-term needs. This email should not be taken as advice.

What’s the worst that could happen?

Our imaginary unlucky investor gets their market timing terribly wrong in every calendar year. In each of the past 25 years, they add £10,000 to global equities (denominated in pounds) in the month before that year’s largest equity market decline. This invariably means that, each year, their first monthly return after adding new capital is negative.

In the most recent full calendar year, 2025, this person would have made the annual addition of £10,000 to their investment pot at the end of February. This was just before the 6.5% equity market decline in March, triggered by tariff concerns ahead of ‘Liberation Day’ tariff announcements. In 2020, our investor would have made their investment in February, ahead of the Covid-19-induced 11% drop in equity markets.

But despite getting their timing perfectly wrong every year, after all the ups and downs, our unlucky investor would still have ended 2025 with £1.2 million in their investment account.

This is obviously much higher than the £250,000 they would have invested over those 25 years, but would they have been better off in cash?

Had the same investor instead saved £10,000 each year over the past 25 years at the prevailing interest rate (represented by the overnight GBP rate), they would have accumulated just £320,000 — about 25% of our fictional unlucky investor’s £1.2 million.

Interestingly, our unlucky investor also delivers impressive investment returns relative to a disciplined periodic investor who invests their £10,000 on the first day of the year, 1 January, without fail. By design, the January investor invests before (or occasionally at the same time as, depending on when the worst month falls) the unlucky investor.

Over the 25-year sample period, the unlucky investor performs almost identically to the January investor. At the end of 2025, both had turned their 25 investments of £10,000 into £1.2 million.

Our unlucky investor only outperformed the January investor in eight of the last 25 years, but in very volatile years often did significantly better. 2002 is one such example. The worst month was September’s 12.5% decline, but this occurred after the January investor had already endured April’s -5.8%, June’s -10.4%, and July’s -10.6%.

Is perfect timing worth anything?

Of course, every unlucky investor needs a ‘fortunate friend’. In our exercise, this fortunate friend manages to add their annual £10,000 to global equities just before the calendar year’s largest monthly equity market increase.

Unsurprisingly, starting an investment before a high-performing month yields better returns than beginning before an equity market decline – but the impact could be less than one might imagine. By waiting for perfect timing, our imaginary fortunate friend sometimes misses out on returns that occur earlier in the calendar year. As a result, after 25 years, they only perform slightly better than our unlucky investor, turning their 25 investments of £10,000 into £1.3 million.

In this specific exercise, investing before the best month of a calendar year, relative to investing before the worst month, yields an improvement of just 5.4% – less than 0.25% per year.

Perfect timing has made a slight difference, but the key driver of financial returns for our unlucky investor and their fortunate friend, as well as the January investor from earlier in our exercise, has simply been the time they have spent invested in equity markets.

Making a plan and sticking to it

Our unlucky investor exercise illustrates two well-known investment adages. First, time in the market matters; second, market timing is not essential for a successful long-term investing strategy.

However, our exercise does not negate the importance of emotions when investing. Undoubtedly, for our unlucky investor, the experience of repeated poor timing could cause emotional distress, leading them to give up and move to cash – thereby missing out on the long-term returns typically offered by equities.

For us, this highlights the importance of a robust, long-term investment strategy that can weather a range of market conditions, and can be adjusted based on data, analysis and conviction – not emotion or kneejerk reactions.

As our unlucky investor shows, disciplined investing and staying the course over longer periods have historically been the way to compound wealth.

The above article has been written and published by Coutts Crown Dependencies investment provider, Coutts.