In investing, a key consideration is the time horizon. There is a general perception that investing is a risky proposition, but this risk can be mitigated by holding investments for longer periods.
Markets are volatile in the short term. Prices may fluctuate dramatically in response to various economic and political factors, news headlines, and market sentiment. However over the longer term, markets have historically delivered positive returns.1
US stocks represented by the S&P 500 have, in the average 20-year period since 1950, delivered an annualized return of over 10%. Some 20-year periods were better (over 18% ending right before the tech-bubble burst in 2000), and some 20-year periods were worse (just under 5% right after the Covid-crash). 1
In the short term, markets are unpredictable. The market has rewarded investors who have taken a long-term view and been patient. Fixed income has lower volatility than equities. In addition to patience, pairing stocks and bonds together in a diversified 60% stock and 40% bond portfolio has also mitigated some of the equity volatility.
The longer you stay in the game, the more predictable your range of outcomes may be. Whether you need help picking the right asset allocation for you or want to discuss the recent short-term volatility, we're here for you. Give us a call.
Please note that the chart above represents blended index performance (see footnote) and is not representative of Foster Group’s model returns over the same period. Index performance does not include the impact of fees, commissions or taxes, all of which would have the impact of reducing investor return.
1Sources: Dimensional Fund Advisors, Bloomberg, Foster Group calculations.
Stocks: S&P 500. 1/1/1950-3/31/2023.
Bonds: 5Y US Treasury from 1/1/1950-12/31/1975; Bloomberg US Aggregate from 1/1/1976-3/31/2023 60/40 Portfolio: 60% Stocks, 40% Bonds, rebalanced on January 1 each year.