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Why Stocks Aren’t Risky

Published on June 25, 2018
While stocks deliver unpredictable returns in the short-run, stocks are the least risky choice to build wealth over longer time periods. As the investment horizon increases, loss of purchasing power becomes the main risk.

On the other hand, the chances for positive returns from investing in stocks approaches near certainty. Investing in stocks generates a positive return 63% of the time for any calendar month, 75% of the time for any 12-month period, and a greater than 95% chance for any 10-year period.


* 1 Month returns are not annualized. Figures include dividends and are compounded by geometrically linking monthly returns. Source: Fama-French Market Return Series, June 1, 1926 – December 31, 2017.

Most of the extreme minimum and maximum returns in the above chart occurred during the Depression Era, when the world was a much different place. One thing that hasn’t changed, however, is the average stock market returns over these rolling periods. Regardless of the period examined, each of the rolling time periods return on average between 10% to 12% annually. This is because periods of low returns are followed by periods of high returns, and vice-versa. Stock market returns regress to the mean over time. Simply staying invested improves results with every year invested, regardless of the conditions.

From the Behavioral Viewpoint

What is Going On?

  1. We are easily fooled by randomness and believe that there should be straight-forward explanations for stock market movements. The reality is that over shorter time horizons, markets are largely driven by a complex set of random short-term events and behavioral reactions.
  2. Fallacy of control is a bias where we want to believe that we can comprehend the markets and make smart investment decisions. Attempting to navigate short-term market conditions is incredibly difficult and can be costly.
  3. We are prone to recency bias, where recent events carry more weight than they deserve. Recent events are also likely to be more extreme in either direction and can easily lead to overreaction.

What can we do?

  1. Develop a plan that separates short-term and long-term investments. Fund long-term investments early and often and withdraw as late as possible.
  2. Build a strategy-diverse equity portfolio that can be resilient in a variety of market conditions to help you stay fully invested for the long run.
  3. Work with a skilled advisor who can help you avoid detrimental short-term decisions that can impact your long-term success.

Get Behavioral Investing Insights

Behavioral Viewpoints feature new topics each month which are intended to help advisors and investors gain a deeper understanding of how behavior shapes the investing landscape.


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.