Blogs & Comment

Stocks for the long run

If you stay invested in stocks for 10 years, youll come out ahead. Thats what an calculatorshows for every 10-year period from 1934 to 2007, using end-of-month values of the S&P 500 Total Return Index (768 observations). For those rolling 10-year periods, you would have averagedan annual return as high as 21.3% or as low as 0.4%, with a tendency toward 12.8%.
If you had invested for periods longer than 10 years, the average annual returns move in closer to the mean. For example, for holding periods of 25 years (588 observations), annual returns were as high as 17.3% and as low as 7.3%, with a tendency to 12.2%.
If you had invested for periods shorter than 10 years, your chances of losing money are material. Take rolling 12-month periods. There were 670 of them from 1934 to 2007, and 30% incurred losses. You could have earned as much as 83% or lost as much as -49.5%, with a tendency to 12.8%.
These online calculators can be useful. Note, however, the calculator does not go back to the 1920s. If it had, it’s possible some of the 10- and 15-year periods may have shown some negative returns.