Leap year investments

Staci West 27/02/2020 in X Millennials

In the Gregorian calendar, most years that are multiples of 4 are leap years, when 29 February – ‘leap day’ – is added to the calendar as a corrective measure, because the Earth does not orbit the sun in precisely 365 days.

I say ‘most’ years because – fun fact – every 100 years we skip a leap year, unless the year is divisible by 400!

For example, 1900 wasn’t a leap year, but 2000 was. This is because, over a period of four centuries, the accumulated error of adding a leap day every four years amounts to about three extra days. This means that 2100 won’t be a leap year because, although a multiple of four, it’s not divisible by 400.

I’m possibly the only person that finds that fascinating, but you better believe that if I live to be 106 I will sharing that fun titbit with everyone!

‘You know that extra day you’ve been wishing for? It’s here!’

For some, 29 February will be just another day. But it’s also an “extra day,” so why not get some of that life admin crossed off the list? Or why not use this leap day as an opportunity to check in with your investments?

While you should review your investments annually, a thorough portfolio review – especially those just starting out – could be every four years. I’m not saying that you should only check on your investments on the 29 February, but perhaps shift your mindset to ignore short-term noise and focus instead on long-term performance.

It’s about thinking years and years in advance and not simply weeks or months. To illustrate the point, the table below shows the FTSE 100 annualised and total returns over the last 32 years as eight independent four-year time periods*.

4-year leap year periodsAnnualised Return*Total Return*
29 February 2016 – 24 February 20208.47%38.32%
29 February 2012 – 29 February 20164.72%20.27%
29 February 2008 – 29 February 20123.88%16.47%
29 February 2004 – 29 February 200810.66%50.02%
29 February 2000 – 29 February 2004-5.20%-19.26%
29 February 1996 – 29 February 200017.27%89.25%
29 February 1992 – 29 February 199614.71%73.23%
29 February 1988 – 29 February 199215.33%77.01%

For the eight periods, the average four-year annualised return was 8.73%*. The lowest four-year period was during the years 2000-2004, where we saw an annualised return of -5.20%* or a loss of -19.26%* for the 4 years.

Choosing the right fund can also elevate some of the stress caused by constant news flows, which is why FundCalibre was created – to help narrow down the field of thousands of funds to a few hundred.

TR Property Investment Trust current share class was launched on 29 February 1996, although it became a real estate specialist vehicle in 1982 and has a history dating all the way back to 1905. The trust has returned 3188.6%** since that leap day in 1996 with an annualised return of 15.68%***.

Having a broader focus allows you to tune out the irrelevant. It also helps keep emotions and knee jerk reactions in check: think Brexit, US elections and the Coronavirus.

Over the past 30 plus years there have been multiple wars, conflicts and economic booms and busts. Through all of this, markets have rewarded the long-term patient investor. And if there’s anything we Millennials have in our favour – it’s a long term investment horizon.

*Source: FE Analytics, total returns and annualised returns in sterling
**Source: FE Analytics, total returns in sterling, 29 February 1996 to 24 February 2020
***Source: FE Analytics, annualised returns in sterling, 29 February 1996 to 24 February 2020

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.