The S&P 500 has returned an average of 11% per year since 1950 and has done so despite an average intra-year drawdown of 14%, and often drawdowns that are much worse. The lesson? Volatility doesn’t equal a permanent financial loss unless you sell.
. . . 1987 “This time it’s different” 2001 “This time it’s different” 2008 “This time it’s different” 2011 “This time it’s different” 2020 “This time it’s different” 2022 “This time it’s different” . . .
The index is DESIGNED to outperform. Companies that underperform are replaced by companies that outperform. The index today looks nothing like the companies in 1950.
But volatility kills retirement accounts, people taking distributions from their money. You cannot say risk and volatility do not equate for retirees. I think you are full of something.
Exactly why I stay vested in the S&P.
Peter Mallouk Such a clear reminder staying invested through volatility is where the real long-term gains come from.
Just the general idea of keeping your money in the market, depends on what makes up your portfolio. Are you in IRA’s where you have almost complete autonomy to trade the markets up or down or a typical 401k which has very limited instruments. If you actively manage your portfolio,set it and forget (don’t sell) is not ideal, whether you are in 401k’s or IRA’s.
Peter Mallouk what are your thoughts on Ray Dalio's economic outlook as it pertains to investments during what he describes as changing world order?
Turning a paper loss turn into a material loss for the long term, plan driven globally diversified investor is a purely human achievement.
Great chart. It perfectly illustrates the case for staying invested and reframes volatility as a feature, not a bug. By layering in strategies like dollar-cost averaging and tax-loss harvesting, that volatility can be used to a distinct advantage for long-term, after-tax performance!
CEO Staunton
1wI applaud the “Rip Van Winkle” buy & hold approach to investing. Sadly, a study by Dalbar found that the average retail investor earned just 2.6% annually, due to emotional decision-making. However, many investors such as those saving for a child’s college education or their own retirement, or undergoing setbacks like job-loss or divorce, also underestimate the possibility of becoming forced sellers in down markets if they don’t have a balanced portfolio. https://www.quantifiedstrategies.com/how-likely-is-it-that-retail-investors-underperform-the-market/#:~:text=Final%20Thoughts-,The%20Numbers%20Don't%20Lie,gains%20on%20a%20$100%2C000%20investment.