February 14, 2025
What is Mean Reversion, and How Can Investors Use It?
Table of contents
Key Features to Look for in an
Investment App for Beginners in the UK
Investment App for Beginners in the UK
Introduction
Taking a deeper look at one of the most important statistical concepts in investing
Introduction
As you will no doubt be aware, the fields of statistics and investing are closely intertwined. After all, stock market history is a century long dataset with opening and closing prices of assets on which we can perform statistical analyses.
People have tried for decades to assign statistical models to datasets from the stock market and use these to forecast forwards, with limited success. There are, however, some concepts that persist beyond the notions of predicting stock market performance to make money. One of these is reversion to the mean.
Reversion to the Mean
So what is reversion to the mean? It's a common statistics term often banded around both in day-to-day life and with respect to investment performance but few understand what it means.
In essence, reversion to the mean is the tendency for a variable that has been observed to differ from its average value to eventually return to that average value.
This phenomenon can be seen in many aspects of life, including investment performance. In this blog post, we will discuss reversion to the mean and how it affects investment returns. We will also provide some tips on how you can take advantage of this phenomenon in order to improve your investment portfolio!
What is reversion to the mean and why should you care about it
Human beings are often guilty of over-reacting to short-term changes. This can be seen in our daily lives when we make decisions based on recent events that may not be representative of the long-term trend. For example, you may go on a diet and lose a significant amount of weight in the first month.
Your friends and family may start to compliment you on your weight loss and you feel great about yourself! However, this short-term change is not likely to be representative of the long-term trend.
In other words, it is unlikely that you will continue to lose weight at the same rate in the second month or even maintain your weight loss.
The Sports Illustrated Paradox
This tendency to over-react to short-term changes is also seen in the stock market. In fact, there is a famous phenomenon known as the "Sports Illustrated Paradox" which demonstrates this concept perfectly.
The Sports Illustrated Paradox states that a player / team that is featured on the cover of Sports Illustrated magazine is likely to have worse performance in the following season. Wait, what do you mean worse?
The period following a season of outperformance
That's right: this is because the team has been "blessed" with good fortune and people tend to over-react to this short-term event. Making the cover of Sports Illustrated usually requires a season of extraordinary performance, likely beyond what is expected of a player / team.
As a result, one might bet on the team expecting that the run of good form will continue. However, this is usually not the case and the team's performance reverts back to the mean the following season.
How reversion to the mean affects investment performance
The same can be said for investment performance. Just because a stock has had a great year does not mean that it will continue to outperform in the following year. In fact, reversion to the mean would suggest that the stock is likely to underperform!
Fundamendal Analysis
Of course, this is purely from a statistical standpoint and ignores the fact that stock prices are (sometimes) based on fundamentals too. However, what it does do is highlight the importance of understanding basic statistical concepts and how they might affect your portfolio.
For example, when a stock or fund outperforms the market in the short-term, investors tend to pour money into it in the hope of earning above-average returns. However, reversion to the mean suggests that this is not likely to be sustainable in the long run. You of course want to be making investments before their big run ups rather than afterwards.
Blue Chip Companies
That being said, the best companies continue to grow strongly for decades, so it's vitally important to distinguish between periods of outperformance in stocks that have historically been undervalued with respect to future potential, and those that experience secular growth by virtue of just simply being better than everyone else.
Or, you know, having a Facebook-esque monopoly.
Tips on how to take advantage of reversion to the mean in your investment portfolio
Investors need to be aware of this phenomenon in order to avoid making costly mistakes. Here are a few tips on how you can take advantage of reversion to the mean in your investment portfolio:
- Don't chase performance: When a stock or fund outperforms the market in the short-term, resist the urge to pour money into it. Chasing performance is a surefire way to lose money in the long run. As mentioned, decide if your urge to do so stems from long term belief in the company or a hunt for short term gains.
- Be patient: Many investors are impatient and want to see immediate results from their investments. However, reversion to the mean suggests that it takes time for investment performance to revert back to the average. Think trends not swings!
- Stay diversified: Diversification is key to any successful investment portfolio. By spreading your money across different asset classes, you can minimise the impact of reversion to the mean. As different individual securities wax and wane in performance, the effects of short term fluctuations may well balance each other out.
Conclusion
The bottom line is that reversion to the mean can be a powerful tool for improving your investment performance.
By understanding and taking advantage of this phenomenon, you can improve your chances of achieving success in the stock market! Of course, keen portfolio management requires a detailed analytical tool with real time updates and insights on all your holdings.
Which is handy, because that's exactly what we've built. You can find a signup link for the Strabo portfolio tracker at the foot of the page.
This is one more example of how a basic understanding of statistics puts one ahead when thinking about not just investing but how real world events occur and interact with one another. There is a great deal of literature on the subject and smarter minds than ours have distilled this into more interesting and simpler summaries. We particularly like Taleb's Black Swan Theory and How Not to Be Wrong by James O'Brien.
What statistical concepts do you apply to your own portfolio management?
Why Use Investing Apps in the UK
The UK has seen a boom in investing apps in recent years, which offer beginner investors an easy to use and accessible option to get into the market.
Investing is now simpler than ever thanks to these applications, which get rid of the need for pricy brokers or complicated procedures. Investing apps like Trading 212, Freetrade, and Revolut make it possible for young and beginner investors to take control of their investments with their user friendly interfaces, built in educational tools and minimal or no costs.
As the need for low cost investing options and financial independence continues to grow, the UK is expected to utilise mobile investing tools even more in 2025. More people in the UK are using apps to manage their money as a result of its adaptability, simplicity of use, and the growing trend towards digital financial solutions and increased awareness of personal financial planning, which makes investing apps an effective tool for beginner investors.
Investing is now simpler than ever thanks to these applications, which get rid of the need for pricy brokers or complicated procedures. Investing apps like Trading 212, Freetrade, and Revolut make it possible for young and beginner investors to take control of their investments with their user friendly interfaces, built in educational tools and minimal or no costs.
As the need for low cost investing options and financial independence continues to grow, the UK is expected to utilise mobile investing tools even more in 2025. More people in the UK are using apps to manage their money as a result of its adaptability, simplicity of use, and the growing trend towards digital financial solutions and increased awareness of personal financial planning, which makes investing apps an effective tool for beginner investors.
Benefits of Using Investing Apps for Beginners
There are a number of advantages to using investing apps for beginners, particularly for those who are just getting started. Here are a few main benefits:
- Accessibility - By providing a straightforward, mobile friendly platform that is available at anytime and from any location, investing apps have completely changed how individuals invest. You no longer have to spend hours learning complicated systems or setting up sessions with financial experts. Beginners can begin investing directly from their smartphones with a few taps. Anyone, regardless of their schedule or location, can participate in investing without any obstacles thanks to this immediate access.
- Low cost - The affordability of investment apps is one of their most notable benefits. The high commissions and administration costs associated with traditional broking services make it challenging for those starting out to invest small amounts of money. On the other hand, a lot of investment apps provide cheap fees or commission free trading, which makes them perfect for beginners. This enables beginners to invest without fear of losing a significant amount of their profits to fees, allowing them to give more money to the market.
- Adaptability - Traditional investment strategies are not as flexible as investing apps. Beginners can more easily dabble without making a significant upfront payment because many investment platforms enable users to invest in a variety of assets, stocks and shares, exchange traded funds (ETFs), and specialised investment options, allowing beginners in the UK to diversify their investment portfolios right away. Furthermore, everyday investors may manage their investments on their own terms and are not restricted to a 9 to 5 schedule thanks to the option to trade at any time and from any location.
Investment apps are a great place for beginner investors to start because they combine low-cost solutions, user friendliness, and convenience to help gradually increase wealth.
Manage your wealth like never before
Get started
Key Features to Look for in an Investment App for Beginners in the UK
It's crucial to search for features that can features that can facilitate your learning and make investing simple and accessible when selecting an investment app as a beginner. Here are some essential features to look out for:
- East to use interface
The design of the app should be simple and intuitive. You will find it easier to comprehend and utilise the platform without feeling overwhelmed if it has a straightforward and uncomplicated layout. - Educational Resources
The best investment apps include educational materials such as FAQs, videos, tutorials, and articles. Beginner investors can use as a guide to understand important investment strategies and make wise choices. - Platform fees
A lot of investment apps charge management fees and trading fees. To protect your investment gains, it's crucial for beginners to select an investment app with little to no costs. The best investment apps waive management fees or provide zero commission trading. - Low minimum investment
For beginners who might not have a large initial investment, apps that let you start investing with small amounts of money are excellent. Also look for apps that sell fractional shares, so you can invest in pricey stocks without having to purchase the entire share. - Portfolio diversification tools
Seek for investment apps that provide a variety of investment options, including mutual funds, index funds, and exchange traded funds (ETFs). Even with little money you can create a diversified portfolio by making a fractional investment in individual stocks. - Robo-Advisor Features
Some investment apps include robo-advisors which automatically manage your investment portfolio according to your goals and risk tolerance. For those whose may not feel comfortable choosing their own investments, this is a fantastic benefit. - Security features
It is important to ensure that the app has strong security features like encryption, two-factor authentication, and safe account recovery methods to protect personal data and information. - Current market data
The best investment apps have real time market data, charts and stock market performance metrics which are essential for beginners who wish to remain informed and make wise judgements. - Type of investment accounts
There are many types of investment accounts available, such as investment accounts for minors, individual retirement accounts and individual taxable accounts. You should choose an investment app that provides you with a range of account options that can help meet your financial objectives.
Further reading
Investing
May 30, 2025
What Happens When You Short a Stock and How Can You Do It?
This is the summary of the blog post on shorting a stock
Read article
Company Updates
May 16, 2022
Why We're Crowdfunding
Read more about our decision to launch a Crowdfund with Seedrs
Read article
Investing
May 2, 2023
What is the Best Crypto Portfolio Tracker
Discover how to use Strabo and other tools to track your crypto portfolio across platforms
Read article
Investing
November 19, 2024
Why is there a Crypto Surge and What Does it Mean for my Portfolio
With crypto prices rising across the board, let's take a look at what this means for your portfolio
Read article
Investing
February 14, 2022
Why a Bear Market Might be a Good Thing for Crypto Investors
A downtrend in crypto markets could prove to be a good thing in the long term. Here's why
Read article
Investing
July 14, 2022
What is Responsible Investing and Why It Matters: ESG Funds
A brief introduction to impact investing for consumers
Read article
Saving
December 3, 2022
Why Energy Prices are Rising: A Brief Explanation
A brief look into the increase in energy prices in the UK
Read article
Saving
June 22, 2022
Why is Petrol so Expensive in the UK in 2022?
It is now more expensive than ever to fill up your car. But why?
Read article
Company Updates
March 5, 2024
What we learnt from launching on Product Hunt for the first time
Launching Strabo on Product Hunt
Read article
Investing
June 14, 2023
Where Should You be Buying Stocks: The UK's Top Brokerage Accounts
Find out which is the best brokerage account to open in the UK this year
Read article
Investing
September 9, 2024
What Metrics Should I be Tracking in my Investment Portfolio
Find out what you should be looking for when tracking your portfolio
Read article
Saving
August 28, 2024
What is the 100k Tax Trap and How Can You Avoid It
A dramatic effective tax increase awaits. Find out what to do when it hits
Read article
Saving
December 3, 2022
What is Inflation, and Why Does it Matter?
Discover how rising prices come about and what they mean for you
Read article
Saving
June 29, 2024
Prepare Yourself for Unexpected Expenses: How to Plan for the Future
Get ahead of any large upcoming costs before they affect you
Read article
Investing
August 17, 2022
Modern Portfolio Theory: Real-World Applications
Discover how MPT can be applied to your investments
Read article
Saving
February 21, 2025
Top 10 Best Apps for Saving Money UK: Boost Your Savings Effortlessly
Find out which ones you should download today
Read article
Saving
January 31, 2022
The Top 5 Bank Accounts for Digital Nomads
Which should you use when moving abroad
Read article
Guides
March 2, 2024
The Top 5 Financial Planning Tools Used by Advisors
Which software can help you improve your clients' experience
Read article
Guides
May 11, 2023
The Property Investment Guide
Learn about getting started with property investing with Strabo
Read article
Investing
June 21, 2024
The Top 10 Financial Trends to Watch in 2024
Here's what you should be paying attention to for the upcoming year
Read article
Financial Independence
December 8, 2022
The Pros and Cons of an Increased Workplace Pension Contribution
Should you increase your pension contributions or invest elsewhere?
Read article
Investing
September 26, 2024
The Future of Finance: 10 Key Fintech Trends Shaping 2024 and 2025
Here's what to pay attention to in fintech in the coming years
Read article
Guides
March 14, 2023
The Financial Planning Guide
Your detailed guide to personal financial planning
Read article
Saving
April 7, 2023
The ISA: Part 1 - What is it, and How Should I Be Using It?
What are the different types of ISA and how can you use them as an effective tool?
Read article
Investing
December 15, 2022
Fear and Greed Index: What It Is and Its Market Impact
Measuring how much fear and greed is affecting market prices
Read article
Saving
December 3, 2022
Best Savings Account for International Students Abroad
A resource to compare savings accounts for UK students abroad
Read article
Saving
June 14, 2024
The Cost of Marriage: Effects of a Wedding on Your Financial Life
Calculate how much your wedding might cost you
Read article
Investing
October 28, 2022
Portfolio Risk Analysis: Measuring Investment Vulnerability
How to measure and react to the risk in your investment portfolio
Read article
Guides
April 3, 2023
The Capital Gains Tax Guide for the UK
A simple guide to capital gains tax in the United Kingdom
Read article
Saving
May 2, 2022
The Cheapest Digital Nomad Locations: Where to Go on a Budget
Tips for moving abroad from the Strabo team
Read article
Investing
February 22, 2024
The Best Investment Options in UAE
Tips for investing in the UAE from the Strabo team
Read article
Saving
April 4, 2022
Create Budgets: Best Finance Apps in Australia for You
Tips for saving money if you're in Australia
Read article
Investing
August 2, 2024
The Best Digital Asset Management Software for the United Kingdom
Today we're breaking down the best software to manage your assets
Read article
Saving
December 16, 2022
The Best Finance Apps for Couples: Manage Your Money Together
Try out Strabo or one of the other apps designed for couples to manage their finances
Read article
Investing
March 7, 2022
The Best Investing App in Europe: Find Out Which One is Right for You
Look no further - a breakdown of the best investing apps for Europeans
Read article
Investing
April 18, 2022
The Best Bank Account for UK Landlords
A brief exploration of what makes a good bank account if you have rental property
Read article
Investing
February 14, 2025
What is Mean Reversion, and How Can Investors Use It?
Taking a deeper look at one of the most important statistical concepts in investing
Read article
Saving
May 9, 2022
Best Bank Account for Expats & Digital Nomads: Bank Stack
How best to manage your money strategically across countries
Read article
Company Updates
January 14, 2024
Strabo is Live! 5 Lessons learned from a Public Software Launch
Key learnings from a public SaaS product launch
Read article
Saving
December 3, 2022
The 2022 UK Budget Announcement: Everything You Need to Know
Key headlines from this mornings red suitcase
Read article
Investing
May 2, 2023
Startup Investing Part 1: When and How
Is it a good idea to put your investment capital into early stage companies?
Read article
Investing
April 4, 2023
Startup Investing Part 2: Venture Capital, EIS and VCT
A follow up on investing in early stage companies
Read article
Saving
June 27, 2024
Preparing Your Savings for a Baby: How Much Does it Cost?
Helping you make one of the most important personal decisions in your life
Read article
Financial Independence
June 30, 2022
Should I Put All My Pensions Together?
Helping you decide if separating or combining your pensions is the right choice for you
Read article
Investing
August 5, 2022
Should You Invest in Gold and Silver?
They're huge asset classes, but are they worth your money?
Read article
Investing
July 11, 2024
Smart Strategies for Investing While Living Abroad: An Extensive Guide
An expat's help guide for investing abroad
Read article
Investing
November 30, 2022
Rental Property: The Best Buy to Let Mortgages for First Time Buyers
How to finance your first rental property
Read article
Company Updates
June 6, 2022
Risk Appetite vs Risk Tolerance: How They Should Impact Your Portfolio
Understanding risk: one of the most important aspects of personal investing
Read article
Saving
July 4, 2022
Paying Down High-Interest Debt: Avalanche vs. Snowball
Are you in debt? If so, this repayment strategy blog is vital for you
Read article
Guides
October 1, 2024
Maximize Your ISA Allowance: Top Tips for UK Investors 2024/25
Make the most of your £20k allowance this year
Read article
Guides
December 3, 2024
Master Wealth in 2024: Smarter Strategies for Your Finances
A categorical summary of top strategies for the year
Read article
Saving
June 23, 2023
Managing Debt: Smart Strategies for Borrowing and Repayment
Get a hold over your debt and how best to complete repayment
Read article
Investing
December 4, 2024
Is Dumping $230K into the S&P 500 All at Once a Bad Idea?
Learning how to invest a lump sum
Read article
Financial Independence
July 29, 2024
Making the Most of Your Pension Pot: Tips for New Savers
Get a grip on your pension with Team Strabo
Read article
Guides
July 10, 2024
Making the Most of a Gift or Bonus: A Practical Guide
Learn the responsible way to manage a lump sum
Read article
Saving
March 14, 2022
Is there a Multi Currency Personal Finance App?
Discover cross-border investing with a multi currency finance app
Read article
Financial Independence
December 3, 2022
Is Passive Income Possible Through Dividend Investing
Capture company earnings with strategic dividend investing
Read article
Investing
August 22, 2024
Investment Strategies in the UK: What You Need to Know
Explore practical strategies to become the best investor you can
Read article
Investing
April 24, 2023
Investing in US Stocks from the UK: A Finance Guide
Capturing upside from the US stock market
Read article
Investing
December 3, 2022
Investing Strategies for Market Turmoil
Navigate the inevitable market disruption with a proper strategy
Read article
Saving
June 1, 2022
I Have No Savings at 30: What do I do?
Don't panic - let's look at your financial situation
Read article
Investing
June 10, 2022
Investing During a Bear Market: Tips to Protect Your Portfolio
Navigate market turmoil with a robust investing strategy
Read article
Investing
June 27, 2022
Investing in Hated Sectors: Do Sin Stocks Outperform Others?
Sin stocks have the potential to be volatile and risky. But do they outperform the market?
Read article
Investing
October 28, 2023
How to Use Chat GPT as Your Personal Finance Assistant
Leverage AI to improve your investing strategy
Read article
Financial Independence
January 26, 2024
How to Use a Side Hustle to Boost Your Income
Discover how a side hustle can supplement your income and net worth
Read article
Saving
October 18, 2024
How to Prepare for the 2024 Budget
Discover the highlights from the latest red suitcase
Read article
Investing
December 3, 2022
Choosing the Best Stocks for Long-Term Investment: A Guide
How to build a portfolio that endures for the long term
Read article
Investing
September 18, 2024
How to Buy Shares Online in the UK: A Step-by-Step Guide
Get started investing in shares today
Read article
Saving
June 19, 2024
How Much to Spend on Holidays Per Year
Budget for this year's holiday now
Read article
Saving
August 22, 2022
How to Budget and Invest on an Irregular Income
Smooth your freelancer income
Read article
Saving
May 6, 2025
How to budget for a Holiday
Plan your expenses for this year's holiday today
Read article
Financial Independence
February 18, 2025
How Much Should I Be Saving for Retirement? A Practical Guide
Planning your income and expenses for the later years in life
Read article
Financial Independence
February 8, 2023
Fire Movement UK: The Financial Independence, Retire Early Movement
Discover FIRE with Strabo
Read article
Saving
January 20, 2023
How Many Bank Accounts Should You Have in the UK?
Set up your bank stack with the help of Team Strabo
Read article
Company Updates
June 7, 2022
How Crowdfunding Works for Startups
Discover fundraising tips from Team Strabo
Read article
Saving
December 3, 2022
How Best to Navigate the UK Tax Code: Your Guide for Consumers
Paying tax in the UK can be confusing. Here's our short guide
Read article
Saving
January 21, 2024
Clever Ways to Save Money When You Get A Pay Rise
Make the most of that extra cash each month
Read article
Investing
September 7, 2022
Futures and Options: What are They, and How to Trade Them
Learn about some of the more esoteric ways to invest with Strabo
Read article
Guides
July 16, 2024
Useful Expat Tax Advice: Maximise Savings & Avoid Penalties
Make the most of overseas tax regimes today
Read article
Saving
November 1, 2024
Do You Need an AI Financial Assistant?
Using modern AI to augment your personal finance management
Read article
Investing
August 11, 2022
Electric Vehicle Stocks are on the Rise: Should You Invest?
Discover investing potential in the financial markets' latest trend
Read article
Financial Independence
November 29, 2022
Do You Need a SIPP & What are the Withdrawal Rules?
Using a Self Invested Personal Pension to accelerate retirement savings
Read article
Financial Independence
June 20, 2022
Do You Need a Global Wealth Manager
A brief guide to using a cross-border financial adviser
Read article
Investing
September 6, 2024
Cryptocurrency vs. Stocks: what’s the difference?
Learning the fundamental difference between two of the most important asset classes
Read article
Financial Independence
July 24, 2024
Detailed Breakdown of Pension Schemes in the UK
Learn about the different types of UK retirement accounts
Read article
Investing
August 16, 2024
Choosing the Top Real Estate Management Software in the UK
Manage your rental properties more effectively with specialist software
Read article
Investing
August 13, 2024
Cheapest Way to Buy Shares in the UK: A Practical Guide
Learn how to get started investing in stocks in the United Kingdom
Read article
Saving
December 3, 2022
Chancellor's 2022 UK Budget Announcement: The Update
Discover updates from this year's red suitcase
Read article
Saving
October 13, 2024
Cash Flow Planning: How to Draw From Your Portfolio
Withdrawing money from your portfolio in the most effective way
Read article
Investing
March 1, 2023
Calculate Your Investment Portfolio Diversification With Strabo
Use our handy tool to figure out how diverse your portfolio is
Read article
Guides
August 8, 2024
Budget of Paris Olympics 2024: Costs, Funding, and Economic Impact
Learn about some of the key financials behind this year's biggest sporting event
Read article
Investing
February 27, 2025
Best Investing Apps for Beginners UK: Top Choices to Start Your Investment Journey in 2025
Learn how best to get started with your first investment with Team Strabo
Read article
Guides
November 7, 2024
Balancing Holiday Expenses with Long-Term Goals in Your 30s
How best to split your spending between work and play
Read article
Guides
October 11, 2024
11 Essential Financial Calculators to Simplify Your Finances
Start using Team Strabo's favourite tools today
Read article
Investing
August 2, 2022
Portfolio Construction Begins with Asset Allocation: A Guide
Learn how to allocate your funds effectively between assets
Read article
Investing
November 12, 2024
Achieve Your Financial Goals in Your 30s with Strabo AI
Leverage our AI financial assistant to get the most out of your portfolio
Read article
Investing
July 8, 2022
10 Tips for Contracts and Tenants for Your First Rental
Avoiding the most common pitfalls with your first investment property
Read article
Financial Indep
September 12, 2024
10 Effective Tips to Get Your Finances on Track
Get the basics right with Team Strabo
Read article
