A Reminder That Stocks Usually Go Up
It's one thing in investing that we do know
With investing there are down days and there are up days. Up years and down years. You can compare it to being on a roller coaster.
If you’re investing you’ve elected to be on the ride. You know exactly what to expect when you begin.
Where your ride differs, is if you’re invested in the short term or over the long term.
In the short term, stock prices go up, down and all around.
In the long term, stock prices go up.
If you had invested $1 into US large company stocks in 1824, that $1 is now worth $16 million in 2023 with dividends reinvested.
This chart is literally up and to the right. Way up to the right.
But how can that be? Isn’t the stock market and investing supposed to be risky and volatile? It sure doesn’t look that bad.
The shorter the timeframe you’re invested, the lower your probability of a positive return. That’s what contains a lot of variables with volatility and risks.
What happens when you stretch that timeframe out over a number of years?
As you can see below, that positive return likelihood increases.
Since 1928, the S&P 500 has returned a positive return 100% of the time when you’re invested for 16 years or longer.
Think back to all that has happened since 1928. There has been a lot for investors and the stock market to worry about. Many reasons for investors to sell.
If we bring it more to current time, just think back to 2009.
If you want to go back even farther, here is a great chart that illustrates all the periods the stock market has endured but has continued to climb higher.
Every month and every year there are reasons to worry as an investor. There is always a reason to be fearful and want to sell. Something is always happening.
But through it all, the stock market continues to be resilient and move higher. Nobody knows what’s going to happen in the short term. You don’t know, I don’t know, nobody knows.
But over the long term, what we do know, is that stocks usually go up.
The Coffee Table ☕
Many of you have asked where I discover the articles I read or what sources I use to find great writing. There are two sites that I rely on.
The first is Tadas Viskanta’s Abnormal Returns. This is sent daily and sorts everything by category along with a short summary of news in the finance and business world.
The second which comes out every weekend is Weekend Reading by Monevator. They share greats reads that caught their eye from over the past week regarding personal finance and more. I always find something informative and different.
Both of these sites have been very generous to feature posts from Spilled Coffee over the years. Great people who put out a great product. Check them out.
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