This week I was inspired to share some long-run stock market data, a morbid quote from a famous economist, and a child crying while playing a board game.
Adam Harding, CFP / Smartvestor Pro
If this is your first time receiving this email, here's some background: "Three Things" is a quick weekly email to recap some things that stood out to me in the previous week. I try to find inspiration in articles, videos, images, and anything else that I can tie into a financial planning or investment tip. Let me know if there's something you'd like to see covered, or if you happen to spot something interesting which you'd like to share. I hope you find this insightful!
Putting your savings at risk can be hard to do. We work, earn, spend, and save as much as we can and it can be hard to watch market values decline when we invest those savings. This piece tells us what many of you already know: if you have time on your side then you have significantly lower chances of actually having to recognize losses during those declines.
Key Takeaway: This article from Visual Capitalist contains the below graphic which shows stock market returns over every 1 year, 5 year, 10 year, and 20 year period after adjusting for inflation. As you can see, negative real returns (in red) are fairly common in a single year, less common in 5 year periods, even less common in 10 year periods, and nonexistent when the timeline is extended to 20 years.
A couple weeks ago I commented about “Optionality” which is the ability to choose something without being required to do so. If an investor has the ability to maintain optionality around when they sell stock holdings, then history shows a significant increased likelihood of capturing positive stock market returns.