by Austin Boyce: Portfolio Management; Emerging Advisor; Process Designer

Love is in the air this month. It made me realize that, in a sense, we ask clients to envision their money entering a long-term relationship with the market. It takes patience, trust, and a willingness to ride out the ups and downs.

Wanting a little perspective, I reached out to a client who recently celebrated 60 years of marriage. They said, “All relationships are going to have ups and downs; what helps us get through the down parts is having patience and knowing that the lows are only temporary. All these years later, we have been greatly rewarded.”

Patience and being ok “riding out the lows” are skills that translate well to investing. When we look at market returns for the S&P 500 Index from 1928-2023, holding period returns vary and improve over the long-term horizon. For example, one-month holding period returns have been positive roughly 59% of the time. A one-year holding period indicates positive returns about 69% of the time. Stay in the market longer, say ten years, and returns are positive around 88% of the time.

Why does this matter? Said differently, for any ten-year period when someone bought and held the S&P 500 between January 1928 and December 2023, they received a reward for staying in the market. This is an encouraging improvement, going from 59% to 88%, but if we zoom out one more time to a twenty-year holding period, the story gets even better. 100% of the time, the S&P 500 has had positive returns for any twenty-year holding period. The chart below illustrates this historical data. Over the long-term, market returns aren’t a consistently smooth ride up - but given enough time, your patience is rewarded.

At SoundView, we take a long-term, diversified approach—something our client wisely noted works well for investing (but not so much for romance). We also recognize that returns won’t always be positive, but patience and commitment make all the difference. Still, we aim to minimize the lows based on individual risk tolerance.

Similar to the advice from our client for a successful relationship, we strive to be patient and take the long view.

Disclaimer: Past performance does not guarantee future returns.
Linked Website: https://www.fool.com/investing/2024/02/06/average-stock-market-return-in-every-month-of-year/