The chart below is one of my favorite stats on the stock market:
Since 1926, the U.S. stock market has never had negative returns over a 20-year period.
In fact, the worst annual returns over 30 years in the history of the U.S. stock market would have produced a total return of 850%. That would be 8x your initial investment.
What we can learn from history is the longer your time horizon, the better your odds are at seeing a positive return.
With that being said, the unfortunate part of owning stocks is that they can fall in the short term. Risk and reward go hand in hand when investing. You can’t have exceptional long term returns if you don’t expose yourself to losses.
There have been plenty of declines in the past and there will likely be more in the future.
Since 1926, we have seen two world wars, a depression, multiple recessions, oil shocks, global pandemic and much more. There will always be uncertainty in the market. However, there’s nothing the stock market has yet to overcome.
Corporate America doesn’t rollover when confronted with new challenges. Great companies pivot and find ways to continue to grow. As revenue grows, so do earnings, and earnings ultimately drive stock prices over the long term.
Think of investing in the stock market as a way of investing in intelligent people and companies as they innovate and grow. It’s a bet on the future being better than it is today.
Many people compare the stock market to a casino, but in a casino the odds are stacked against you. The longer you play at the casino, the better chance you have of walking away a loser. It’s the complete opposite in the stock market.
There is a short-term risk for owning stocks. But there is a long-term risk for not owning stocks. A disciplined investor should own a portfolio that matches their goals and time horizon.
Sources and Disclaimers:
Odds the stock market is positive data from stern.nye.edu
Stock Market Annual Returns from Dimensional Fund Advisors
Past performance is not indicative of future results and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
Stock investing includes risks, including fluctuating prices and loss or principal. This information is not intended to provide specific advice or recommendations about any stock nor is it intended to be a recommendation to buy, sell or hold any stock investment. We suggest speaking with your financial professional about your situation prior to investing.
Please consult your financial advisor regarding your specific situation. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy ensures success or protects against loss. This information is not intended to be a substitute for specific individualized tax advice. The Standard & Poor’s Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.