MSCI World hit four new all-time highs in August in sterling terms.
The index, which tracks the performance of global developed stock markets, rose 12.2% between the start of the year and end of August.
It’s often said the essence of investing is to buy low and sell high, which could mean those new market tops put you off investing new money in stock markets – you might even be considering taking some out.
Our research suggests that could be a mistake.
Buying low and selling high is great. But buying high and selling higher has historically been pretty good too.
This article is for information only and not personal financial advice. If you’re not sure whether investing is right for you, a financial adviser can help.
Annual percentage growth
August 2021-August 2022 | August 2022-August 2023 | August 2023-August 2024 | August 2024-August 2025 | August 2025-August 2026 | |
|---|---|---|---|---|---|
MSCI World (Total return) | 0.4 | 6.2 | 20.0 | 12.5 | 20.0 |
Not a short-term sell signal
Over the last 35 years MSCI World has posted 588 such record highs. Each would have felt like an intimidating time to enter the market, but historic returns from investing at those highs have still been pretty attractive. It definitely does not look like a record high is a sign you should be selling in the short term.
The average one-year return from investing at a record high is 10.2% once dividends are reinvested. And that’s not being driven by a few outliers.
More often than not you end up making money after investing at an all-time high – with 84.6% of investments made at an all-time high in positive territory after 12 months. Do remember though that past performance is no guarantee of future returns.
There are of course times when investing at an all-time high doesn’t work out. But the average loss over one year is relatively modest. When markets have fallen 12 months after a peak, they’re on average down around 6.3%, and those events have been concentrated around major events like the dot-com bust, global financial crisis and Covid pandemic.
Rarely a long-term loser
It turns out that investing at market tops is rarely a long-term loser either.
Over ten years, investing in MSCI World at a market top makes gains 89.6% of the time, with an average return over that time of 90.8%. Again, remember that past performance is not a guarantee of future returns, and bear in mind we’re looking at fewer periods over a ten-year horizon.
All of the market tops that ended up losing money over a ten-year period were in either 1999 or 2000. That’s a particularly tough period.
In 1999 and early 2000 the dot-com bubble meant markets were booming, the subsequent crash was painful, but markets did recover before crashing again at the end of the decade when the financial crisis hit. The average loss over those ten-year periods was 8.2%, though in many cases new tops were hit in the intervening years.
Buy low and sell high is great. Buy high and sell higher is not bad
Buying at a market top might not be the best possible time to make an investment. But given the general trend for markets to rise over time, it’s usually still a profitable one.
That’s crucial because picking the perfect moment to invest is all but impossible – and time in the market is usually better rewarded than timing the market.
Of course, markets do go down in value as well as up, and you could end up with less than you invest. Investing is for the long term, typically 5 years or more.