Trading of securities on stock exchanges
Learn more about investing on stock exchanges and invest knowledge in your future.

Learn more about investing on stock exchanges and invest knowledge in your future.
Developments on the financial markets - up-to-date and well-founded. Benefit from our know-how and get your knowledge advantage.
Many articles have been written about the benefits of regular investing, but none have described exactly what its magic is.
While investor sentiment is subject to frequent changes and can, for example, cause more than 20% drops in the course of a few weeks, long-term growth in profitability is the key factor that affects the growth of stock prices in the long term. The magic of regular investing (for example, in the form of retirement savings) is that the total return on the investment is much closer to the achieved fundamental growth of the stocks in which it was invested, and is much less subject to the influence of changes in investor sentiment. Thanks to the sufficiently long time series, I can document this fact in the data of the Top Stocks fund. I
f stock prices were not subject to changes in investor sentiment, the development of the price of the Top Stocks fund unit (blue line in the following graph) would move exactly the same as the fundamental performance of the stocks in its portfolio (green line showing the sum of the growth in company profitability and dividends paid minus fees associated with fund management).
In the long term this means that the trend of the share certificate value follows the profitability trend of the investee companies.
green line = company profitability growth
blue line = share certificate value trend
The advantage of regular investing is that investors continuously average the relative valuation at which they buy future fundamental stock performance, i.e. their investment will reflect much more the achieved future growth in profitability and they eliminate the risk of buying during periods of market euphoria (high P/E ratio) and selling during periods of depression (low P/E ratio). The almost 18-year history of the Top Stocks fund confirms this fact, as can be documented in the following chart, which compares the return on a regular monthly investment in the Top Stocks fund with the return on a one-time investment at the beginning of the fund's existence.
Annualized return since the start of the fund's investment (28.8.2006 - 31.3.2025)
Blue - regular investment
Red - one-off investment
Regular investment provides the chance for a higher yield due to averaging of the relative valuation which is achieved in the share prices.
The benefit of regular investment increases in the case of investments made in future companies with above-average growth.
Because the current relative P/E valuation is lower than it was at the beginning of the fund's existence, the return on a one-time initial investment is also lower than the growth in the profitability of the companies included in the portfolio (after including dividends collected and fees associated with fund management). In the case of a regular monthly investment, the resulting appreciation is much closer to what the companies generated on growing profits (9.2% after including dividends collected and deducting fees associated with fund management).
For this reason, regular investing is a very suitable tool both in the case of pension savings and in the case of medium-term investments (3-10 years). Thanks to regular investing, the investor can also afford a shorter investment horizon than he would have in the case of a one-time investment. The risk of unfortunate timing of the end of the investment is solved in a similar way by the payment of a regular monthly pension, when the investor again sells at the average value of investor sentiment (i.e. average valuation) and thus realizes the largest part of the fundamental development of the companies in which he has invested.
Ján Hájek, CFA
Top Stocks fund manager