How often is the stock market up over time?
from a mathematical standpoint, steeper declines are more difficult to overcome.
Who Wins?
$1,197,900
$1,215,506
Total After 4 Years
Total After 4 Years
The basic idea is a mathematical one:
A steady positive sequence of returns may be more important than a higher more volatile sequence of returns.
Growth comes from the absence of significant loss.
The table of hypothetical returns above illustrates the possible impact of even one down year of a portfolio.
Hypothetical Example 4 year Returns with an Initial Investment of $1,000,000.
What weighs more, losses or gains?
The Lost Decade
If you invested in the S&P 500 in January of 2000, what would be your rate of return (ROR) at the end of the decade?
Ended just about the same place we started.
1346
1115
How rare are market meltdowns?
How does the market fair in times of geopolitical uncertainty?
6 times
HOW MANY TIMES HAS THE MARKET HIT IT'S "AVERAGE" RETURN SINCE 1926?
The above graph shows calendar year returns for the S&P 500 Index since 1926. The shaded band marks the historical average annual return of 10%, plus or minus 2 percentage points. The S&P 500 had a return within this range in only six or the past 91 calendar years. In most years the index's return was outside of the range, often above or below by a wide margin, with no obvious pattern. For investors, this data highlights the importance of looking beyond average annual returns and being aware of the range of potential outcomes.