Financial Planning Fridays #157: Just Wait Longer for Better Returns
This video uses more than 70 years of S&P 500 data to show how average returns grow with time in the market, from nearly flat over a single day to more than 320% across 20 years. It explains why short-term market moves are largely noise, and why a long-term investment horizon is one of the most reliable paths to strong results, though past performance does not guarantee future results.
This video uses more than 70 years of S&P 500 data to show how average returns grow with time in the market, from nearly flat over a single day to more than 320% across 20 years. It explains why short-term market moves are largely noise, and why a long-term investment horizon is one of the most reliable paths to strong results, though past performance does not guarantee future results.
Key takeaways
- Based on over 70 years of S&P 500 data, holding stocks for just a day produces an average return near zero, since short-term moves are largely noise.
- Average returns climb significantly with time: about 9% over one year, 50% over five years, and more than 115% over 10 years.
- Over a 20-year holding period, the average historical return exceeds 320%, though past performance does not guarantee future results.
- The longer an investor stays invested, the more consistent returns tend to become and the less short-term volatility matters to the outcome.
Hi friends, today I want to show you one of the most powerful truths in investing, and it's backed by over 70 years of data. This chart shows the average return of the S&P 500 based on how long you stay invested, from just one day to 20 years.
If you only hold stocks for a day, the average return is almost zero. Even over a week or a month, the average gain is still minimal, just fractions of a percent. That's because short-term movements in the market are largely unpredictable and driven by noise.
But look what happens when you stretch your time horizon. Hold for one year and the average return climbs to nearly 9%. Stay invested for five years, that jumps to 50%. At 10 years, it more than doubles again to 115%. And over 20 years, the average return is over 320%. This is why time in the market beats timing the market.
As far as I know, it is impossible to eliminate the short-term volatility and still get these amazing long-term returns. However, the longer you stay invested, the more consistent and powerful your returns become, and the less you're affected by short-term volatility.
At Presilium, we help our clients build long-term plans designed to weather short-term storms and take full advantage of the growth potential that time delivers. If you're feeling uncertain about your investment strategy or just want a second opinion, we're here to help. Thank you, and I look forward to talking with you next Friday morning.
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