It seems like every time market volatility drives down investment returns, the “stock” answer by financial representatives is to stay invested and avoid rash or emotional decisions. Is that sound advice or just a sound bite?
Our recommendations are based on many different factors, one of which is historical data. While past performance does not guarantee future results, a glimpse into historical market behavior can be enlightening.
Let’s examine market returns, as measured by the S&P 500 Index1, over the last 72 years (1/1/1950 – 12/31/2021). The split in returns between “up” and “down” time periods was:
Days: 54% up and 46% down
Months: 61% up and 39% down
Quarters: 67% up and 33% down
Years: 74% up and 26% down
Admittedly this is just one of the many factors we consider when making investment recommendations, but it does illustrate that maintaining your investment discipline can be a great strategy in times of volatility.
(Source: BTN Research)
1The S&P 500 consists of stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value.