If you’ve watched the market the last few months, you may be questioning why you invest. It may feel like a gamble and it may even make you wonder why you bother. Well, to put it simply, we invest to make money to support some goal in the future. History tells us there are few options better than the stock market.
If you look at the last 30 years of stock market returns, you’ll see a pattern. Take the time period between 1986 and 2016. That was not 30 years of monthly gains. That was 30 years filled with good, bad and downright scary times. You’ll find Black Monday of 1987, the Savings and Loan crisis, Desert Storm, 9/11, and three recessions (including the worst since the Great Depression). Though all that uncertainty, the S&P 500 averaged a 9.99% return per year while inflation averaged about 2% per year. You can take other 10, 20, or 30-year periods and you’ll find similar results. I can’t tell you whether we’ll have a recession next year or the year after. Will there be a recession in the next 30 years? I’m sure there will be.
You may say you don’t have 30 years to invest. For the last 92 years the S&P500 has ended 74% of those years with a positive return. The average positive year being 21% while the average negative year being down 14%. 3 out of 4 years the S&P finishes higher at the end of the year.
Very few people don’t remember the financial crisis of 2007 and 2008. It was ugly. The housing market collapsed, and unemployment soared. It officially lasted just 18 months. It was the longest recession since the Great Depression. it touched almost everyone in some way shape or form and seemed much longer than 18 months. But the cycle continued, and the recovery came. Today we stand as one of the strongest economies in the world.
So, remember why we invest. We invest because it’s worked over time. We don’t invest for a monthly return. We invest to reach goals, support retirement and to stand the tests of time. In the words of Rudyard Kipling, “keep your head when all about you are losing theirs.”
All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.