Markets have felt like wild ride so far this year. But, when we look at the returns for many of the main markets since the start of 2026 then, by the standards of someone who follows markets for a living, the picture doesn’t look so dramatic.
The MSCI World dropped by 1.7% from the start of the year to the end of March, making for a negative first quarter of the year. But you would likely have to see a much bigger decline in your investment returns for your money to have been better off in the long term than cash in the bank.
This is easy to say when it’s just percentages on a screen, and harder to stomach when that converts to hundreds or thousands of pounds coming out of your account. This psychological factor adds to the hurt and can easily lead to us wondering if it’s time to just put our money in cash.
While it may be difficult to have as detached of a view as a financial professional, keeping perspective is key to becoming a successful investor in the long term. Many people will try to time the market and withdraw money when stocks are falling. But by doing this, you potentially lock in losses and it’s difficult to know when the right time is to hop back in.
What does previous experience tell us?
When we’re weathering these periods, it can be easy to feel a bit disheartened by investing in the first place. So, what kind of drops would you need to see for you to really be better off keeping your money in cash? This will of course depend on how long you’ve been invested, and in what.
Let’s say an investor, James, put £10,000 in a fund tracking the MSCI World five years ago, and has put in £100 each month since. If those five years ended on March 31, 2026, James would have £24,538 sitting in their account, including fund fees but not dealing charges. £15,900 of this growth would have come from James's savings, but the other £8,638 comes from investment growth.
If he’d kept his money in cash instead, and earned an average interest rate each month, James’s savings would have amounted to £17,569. So, by investing instead of taking that cash rate, James has made around £6,969. James would have to lose that entire £6,969 of market gains, more than a quarter of the value of his investments, for his five years in the market to be wiped out.
Even if James’s investments did fall by 25% at some point, it’s important to note that he’d only really suffer these losses if he chose to pull his money out of the market at that low point. This is what would be referred to as ‘locking in losses’ because at that point, he’s accepted that his investments are worth that amount and decided to cash out. But, if he rode out the market instead of cashing out, it’s very possible he could reclaim some if not all those losses. In the long term, markets tend to rise.
When it makes sense to cash out
Not everyone has the luxury of waiting on invested money to recover. Those nearing retirement or preparing to purchase a house may have immediate expenses that need to be paid.
The good news is, if you’ve been invested for a decent amount of time, your gains from the market likely largely outweigh the losses you may have experienced so far this year.
As of the 7 April, the MSCI World is down just 0.6% on the year, showing some rebound already from the level at the end of March. Checking your own portfolio can give a better idea of what effect the past three months had on your investments. Some markets, like the FTSE 100, have gone up, so you may find that you are still in positive territory for the year, if even just by a bit.
If your portfolio has experienced just small losses and you are using your investments to make a lump sum payment in the short term it may make sense to swallow a small loss this year and sell investments instead of risking any further bumps in the road. This could be the case for those that are planning to purchase a home.
But, for those that are using just a portion of their money now, it might make sense to keep the rest of the money in the market, at least to some degree. This is a popular strategy for those who are retiring. While it used to be common practice to cash out your entire pension fund upon retirement and put it in an annuity, now more people are choosing to manage the funds themselves. In this case, you could have money in your pension that won’t be used for another 20 years. This means plenty of time to grow in the market, so you could take a laddered approach with your money, where you slowly sell riskier investments over time.
Timing the market is harder than you think
It’s very difficult to outsmart the market. In an ideal world, we’d know when the right time is to sell out and buy back in to keep ourselves in the best position. But this means being right twice: knowing when to sell, and when to jump back in to reap the benefits.
Because the current market conditions are based on geopolitical conflict, it’s even more difficult to anticipate. In a single trading day on 31 March, the MSCI World jumped 2.4%. If someone pulled £10,000 out of the market the day before this, they’d be out by £240, even if they tried to jump in the very next day. In addition, each of these trades comes with dealing costs which can add up over time.
It’s very possible for this to go right one time, maybe even a handful of times. But typically, statistics catch up to us when making these bets, leaving us worse off than we would have been by just sticking with the market.
Hannah Williford: Content Writer
Hannah joined AJ Bell in 2025 as an investment writer. She was previously a journalist at Portfolio Adviser Magazine, reporting on multi-asset, fixed income and equity funds, as well as macroeconomic impacts and regulatory changes...
