Invest with 99% success

Science shows this works

Most people hold their money in cash. This gives them some certainty. As long as the bank doesn’t go bust, their savings are going to be there, albeit eroded by inflation.

But investing that cash in shares or funds for the long term, we are told, is always better. But exactly how much better? And for how long?

Woodford Investment Management in the UK has produced a rather nifty chart to help us. The chart uses data stretching back to 1965 to show the probability of making money over different timescales from equity investing.

It goes like this. Hold your investment for a day and you have a 55.2 per cent probability of making a positive return. Slightly better than tossing a coin, but only just.

Things get better. Keep your investment for a month and chances of making money rise to 60 per cent. Not so bad.

Salt it away for three to five years and the story is much rosier. The figures are 85.8 per cent and 92.8 per cent respectively. Lovely.

Go for the full 10 years and the probability climbs to a warm and pleasing 99.4 per cent. As near a certainty as you could reasonably expect in this world.

As the company puts it: ‘On a three- to five-year view, the odds are very much in favour of a positive return and, over 10 years, the probability of a gain improves to very close to 100 per cent (indeed, the recent financial crisis spoilt a hitherto unblemished record for the UK stock market on a 10-year view!).’

These figures are based on the UK equity market as a whole, without active fund management or any selection of investment themes that might suit a 10-year horizon. They are also for a single investment rather than a regular, drip-feed approach which could smooth out volatility and take advantage of dips.

Despite all this, most people keep their hard-earned money in a low-interest account. They don't understand investing and stick to what they know.

Changing these habits will be hard. Financial education is essential, along with a wholescale demystification of investment jargon and gibberish. Also, decent professional advice at a price affordable by all.

Few are saving enough for a proper pension. Be fearful. Unless we get this right, there’s an awfully big bill coming.