It’s hard to know what to make of them all. If history is any guide, these well-crafted stories rarely pan out and provide little useful or actionable information. For long-term investors, stepping back with a longer-term perspective can help to avoid costly mistakes.
DEVINING VISIONS THROUGH THE MISTS OF TIME
The data would suggest that the most likely outcome in any given year is a stock market gain of 12%, which is the average annual return.1 The data also reveals the fact that 75% of the years are positive in the stock market. Long-term investment decisions should be based on these probabilities, rather than the wide range of diverging opinions and largely speculative narratives. Of course, the actual outcome in any given year can vary widely, but the longer you stay invested and the more draws you take from the distribution, the more likely you are to get the long-term average.
For most investors, there is little need to try to predict the near-term future based on the constant flow of information and opinion regarding recent events and the current investing landscape. Successful investors have a long-term perspective and dedicate a portion of their assets to growth and invest based on long-term probabilities. When this perspective is taken, the largely random and unpredictable stream of yearly events, headlines and subsequent results lose their significance. While the market will surely go up and down, often the best course of action is to stay invested and stick to your plan.
From the Behavioral Viewpoint
Get Behavioral Investing Insights
IMPORTANT INFORMATION AND DISCLOSURES
- Source: Fama-French Market Return Series, June 1, 1926 – December 31, 2021
The information provided here is for general informational purposes only and should not be considered an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. It should not be assumed that recommendations of AthenaInvest made herein or in the future will be profitable or will equal the past performance records of any AthenaInvest investment strategy or product. There can be no assurance that future recommendations will achieve comparable results. The author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions. AthenaInvest disclaims any responsibility to update such views. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any AthenaInvest representative.
You are solely responsible for determining whether any investment, investment strategy, security, or related transaction is appropriate for you based on your personal investment objectives and financial circumstances. You should consult with a qualified financial adviser, legal or tax professional regarding your specific situation. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.