Boring investing could be your route to stock market riches

Financial headlines are dominated by market surges and downturns, which can make investing feel more like a game of Russian roulette than a serious way to build your wealth.

But the good news is that you don't need to be the Wolf of Wall Street in order to be a successful investor.

In fact, there's plenty of good evidence to suggest that being a boring investor, by simply and slowly drip-feeding small amounts and (almost!) forgetting about your investments, could give you better returns in the long run.

Get familiar with pound-cost averaging

Cost averaging is when you put in a fixed amount of money into your investments at regular intervals, such as once a month, regardless of how the markets are performing.

With this method, you reduce the risk of inadvertently investing a large sum at the wrong time - such as when the price of a fund or share reaches an all-time high, only to fall sharply soon after.

For example, if you put £250 a month into a diversified index fund for 40 years, assuming an average annual return of five per cent after fees, the value of your investment could rise to over £364,000. The dollar-cost averaging strategy allows you to buy more shares when the markets are down and fewer shares when the markets are up - reducing your exposure to short-term volatility.

Understand the magic of compounding

Compounding is when money makes money. In technical terms, it continues to earn interest on previously generated interest. While your investments will never grow in a perfect linear fashion, in the long term, your investments should continue to generate their own earnings.

For a full guide to compounding and how it can grow your wealth over the long term, read here.

As a short example:

Avoid being an emotional investor

No one wants to see the value of their investments plunge during a market downturn, such as as a result of the recent Trump tariffs. But remember that short-term price fluctuations are often fuelled by speculation and uncertainty.

Unfortunately, sometimes emotions can get the best of us, and some investors may feel compelled to sell everything at a loss if they fear the markets may get worse.

History shows us that markets tend to recover over time; however, timing the market and identifying when prices will rebound or fall is impossible, no matter what anyone tells you.

In the words of Warren Buffett, one of the world's most successful investors: “Until you can manage your emotions, don't expect to manage money.”

Cut out the noise

As we alluded to earlier, short-term price movements are strongly influenced by speculation and what is referred to as herd behaviour. For example, if all your friends are telling you they are going to invest in a particular stock, you might be tempted to do the same. On a larger scale, this can dramatically increase the share price, only for it to fall quickly again when people start selling.

The economic fundamentals of a share or a fund matter much more for your long-term returns.

For example, as long as your money is invested in companies with good track records of investment returns, stable leadership and strong long-term growth prospects, there’s little point in worrying about short-term volatility.

What the research shows about ‘boring’ investing

Research from Vanguard shows that the long-term performance of index funds - such as those that track the S&P 500 - is easier to predict than active funds. The latter seek to outperform the market but may underperform if they are not managed effectively or if the ongoing investment fees are too high.

So if you're investing to save for a specific goal, like a mortgage deposit or retirement, regularly drip-feeding money into a well-established tracker fund and getting on with your daily life may be all that’s necessary.

Investors who follow this approach don’t need to check their portfolio every day, do any trading, or be constantly on the lookout for the next ‘big thing’.

In fact, since 1928, the S&P 500 - the index which tracks the largest US companies - has delivered a compound annual growth rate of about 10 per cent, or 6.9 per cent when adjusted for inflation, including reinvested dividends. This is despite numerous economic slowdowns, recessions and other global macroeconomic events which caused significant short-term volatility.

The longer you invest, the more time your money has to earn interest from compounding. So, for example:

Boring investing may not make big headlines, but it can build your wealth in the future.

The key is to stay disciplined, drown out the noise, keep investing consistently - and let time and compounding do the work.

When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.