How to Improve Your Odds in the Biggest Casino on Earth

Jan 2, 2023 | Finconomics 101, No Bull Economics

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While stock investments can be very lucrative over the very long-term, everything depends on the timing of your exit. Also, success depends on your ability to stand steady when the sky is falling all around you. Of course, past averages do not guarantee future performance… 

Key Points

As they say, in the long run, we are all dead. However, if you live long enough and don’t have a need to withdraw money from your stock portfolio, you can become very rich indeed. For instance, the S&P 500 Index increased 27x from 1980 to 2022 – this definitely represents a compelling siren’s call.

However, as investors are presumably saving for something with plans to withdraw money at some future point, wealth is a clear function of timing. As evident in the chart below, stock performance over a 10-year holding period varies greatly depending on the exit year.

S&P Timing Graph
S&P Timing Graph

All-the-same, long-term investors seem to enjoy better odds. As evident in the cart below, the average 10-year return of +16.4% (very respectable) handily outperforms the 1-year median of +11.4%. Further, 10-year holders enjoy similar max upside and a substantially lower downside compared to those with a 1-year timeframe. Of course, past averages do not guarantee future performance…  

Long-Term S&P 500 Investors Graph
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