With so many people deviating from their investment plans and making poor investment decisions during downturns, such as getting out of the market or switching from growth to conservative funds, I thought I’d run some stats on market returns.

I decided to look at the returns of the S & P 500, the stock market index that measures the performance of 500 large companies listed on stock exchanges in the United States. Most people have many of these companies in their portfolios so it is as good a measure as any.

I have looked at the following returns since 1950 until 2019:

• 1 year returns. 70 different periods

• 5 year returns. 66 different periods

• 10 year returns. 61 different periods

• 15 year returns. 56 different periods

• 20 year returns. 51 different periods

• 25 year returns. 46 different periods
  
  

What I was looking for was the variety of returns within each time period. For example, the 1 year period with the highest returns and the 1 year period with the lowest returns and what type of range occurred.

Length of investing matters

Here is what I found:

During any 1 year period since 1950, the maximum return was 45% and the minimum was minus 38.5%. A huge difference of 83.5% between the best performing year and the worst performing year.

Not surprising though is that the longer you invest the lower the range between the best and worst periods. The best performing 25 year period since 1950 would have seen you with an annual return of 13.9%. The worst performing 25 period 5.3%. A difference of 8.6% between the best and the worst 25 year period.

I just wanted to show this today for anyone panic selling.

It may not feel like it in volatile times, but volatility over the long term clearly drastically reduces.

If you are investing in shares you should be in it for the long term. There has been no period of 15 years or longer since 1950 where the S & P 500 share market index has lost money. Periods of 5 years or less and it becomes a bit more common place.

Sure, the longer you invest the lower the highs, but the lower the lows too.

As long as you have a solid investment plan, then have confidence in the markets.

Why worry about short term gyrations if you don’t need the money for many years? Don’t you have better things to do with your time?

Buy and hold investing is the best way to long term wealth. Letting our bad investing behaviours getting in our way is the worst way and a surefire way to underperfrorm the index.

If you need an investment plan or recommendations , then get in touch today.

The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here