Morningstar recently published a report called Fundamentals for Investors with some statics regarding the importance of “staying the course.” Here are some highlights of the report:
- If you had $100,000 in the S&P 500 in January of 2007, your value would have dropped to a frightening $54,689 by March of 2009. Had you taken your money out of the market at that point and reinvested a year later, the value would have grown back to $127,517 byJanuary of 2017. Had you not taken your money out and “stayed the course,” your value would have grown to $195,719 by January of 2017.
- If you had a 60/40% equity to debt allocation on September 11, 2001, one month later you would be up 3%, 6 months later up 5%, and five years later, up 42%.
- On October 19, 1987, the Dow Jones crashed over 22%. Had you stayed the course, a month later, with a 60/40 allocation, you would still be down 4.8%. Just six months later your portfolio would have rebounded back 5.2%. One year later that same portfolio would have been up 14%.
- Consider the cost of trying to time the market. From 1997-2016, had you stayed invested in the market you would have averaged 7.7%. However, if you missed the 10 best days, your performance would have dropped to 4%, missing the best 20 days would have dropped your performance to 1.6%, and missing the best 50 days would have resulted in a –4.2% return.
The Morningstar report is filled with other useful information and you are welcome to download it here.
At Montini & Farrah Tax Advisory, we understand the fear of running out of money in retirement and have many different techniques to keep you invested while mitigating the risk of stock market losses. We encourage you to schedule a no cost consultation to review the path you are on and help you with your retirement planning goals.
Written by Marc Montini, IAR and Managing Partner of Montini & Farrah Tax Advisory Group.