We’re starting a new series here that will eventually be a short paper, but thought we’d drip these articles out every week over the course of the summer….enjoy!
#1 – Normal stock market returns are extreme
Most investors understand that stocks return about 10% per year over time.
However, many investors may not appreciate the volatile path that stocks often take to achieve this 10% return. It’s not a steady 10%, 10%, 10%.
Over the past 125 years, the average up year in markets was 21%!
The average down year is -14%.
There are about three times as many up years as down years. In fact, there are more 25% or more up years than down years.
But the down years still happen, and when they do, they’re scary. The more volatile small caps average near a bear market decline every year.
Staying the course can be tough on the path to 10%.
Thanks to our intern Ava for the chart and to Ken Fisher for the inspiration!
