Staying Invested for the Long HaulFebruary 27, 2020
- Volatility can pull a portfolio value down in the short term, but it shouldn’t pull you away from your long-term plan.
- Despite some drastic dips from stocks over the past 20 years, they also rallied for some impressive gains.
- Remaining invested in stocks through downturns and corrections allows you to take advantage of their long-term growth potential.
KEEP A LONG-TERM PERSPECTIVE
Market volatility is a constant for every investor. That’s why you need to maintain your investment strategy and remember the market’s record of long-term growth.
Stay invested to take advantage of the stock market’s growth potential.
Although the stock market has experienced two major downturns since 2000, it bounced back each time and eventually reached higher levels. The chart below demonstrates how the market has fluctuated over the past 20 years. While stocks saw some drastic dips, they also rallied periodically for strong gains.
Over a long-term time horizon, stocks provide a higher return potential when compared with bonds or cash. The light blue line represents a 60/40 allocation of stocks and bonds, which has returned comparable gains with less volatility than an all-stock portfolio.
Source: T. Rowe Price, created with Zephyr StyleADVISOR; S&P; Bloomberg Barclays Index Services Ltd. and FTSE. See Additional Disclosures. Past performance cannot guarantee future results. It is not possible to invest directly in an index. Chart is shown for illustrative purposes only. Stocks: S&P 500 Index, Bonds: Bloomberg Barclays US Aggregate Bond Index, and Cash: FTSE 3 Month US T-Bill Index.
Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg, or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
STAY INVESTED FOR THE LONG HAUL
Investing in the stock market requires a long-term perspective. If you focus on the short-term, it’s easy to let emotions influence your investment decisions, as the market seems to go up and down every year.
While market downturns can lead to short-term losses, the picture changes with a long-term perspective. As the chart below shows, holding stocks for longer periods can reduce the average annualized volatility over longer holding periods. The stock market has delivered positive returns for every rolling 20-year period covered in our analysis.
Help mitigate portfolio volatility by holding stocks for the long-term.
Bottom line: Remaining invested through downturns and corrections may allow you to take advantage of long-term growth potential.
Source: T. Rowe Price, created with Morningstar Direct; S&P. See Additional Disclosures. Price return calculations include dividends and capital gains. Annual returns beginning in calendar year 1970. Rolling 20-year data beginning in 1950. Past performance cannot guarantee future results. It is not possible to invest directly in an index. Chart is for illustrative purposes only.
S&P—The “S&P 500 Index” is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”), and has been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). T. Rowe Price’s product is not sponsored, endorsed, sold, or promoted by SPDJI, Dow Jones, S&P or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the “S&P 500 Index”.
FTSE—Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2019. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE®” is a trademark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor, or endorse the content of this communication.
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- Learn more about the appropriate asset allocation for your investment goals.