By James Motte
I often hear people say how risky it is to invest in the Stock Market. But just how risky is it? Below is some information on 1, 5, 10 and 20 year rolling returns for the S&P 500 from 1926 – 2005. The S&P 500 is made up of the 500 largest US Company stocks and is widely accepted as a proxy for the US Stock Market.
The chart above shows the effects that time has on a portfolio. As you can see, the Market can have significant volatility in one year time frames. However, as holding periods increase, the likelihood of a positive return increases as well. The Market has never had a 20 year time frame when it has lost money and 97% of the 10 years periods have had positive returns as well. I believe knowing these statistics will help investors stay the course when times get tough.
