Following up on Long Term Investing: Buy & Hold Regardless of Short Term Fluctuations, this week we’ll discuss the US stock market, which has returned an average of 10% per year.
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The New York Stock Exchange (NYSE) traces its origins to the Buttonwood Agreement signed by 24 stockbrokers on May 17, 1792 at 68 Wall St.
In general, when people say "the stock market," they mean the S&P 500 index which includes about 500 of the largest publicly traded U.S. companies across all 11 sectors of the economy: Healthcare, Materials, Real Estate, Consumer Staples, Consumer Discretionary, Utilities, Energy, Industrials, Consumer Services, Financials, and Technology. It has returned an average of 10% per year over the past 50 years.
The S&P 500 gained value in 40 of the past 50 years, generating an average annualized return of 9.4%. Only a handful of years actually came within a few percentage points of the actual average. Instead, more years significantly either underperformed or outperformed the average than were close to the average.
In terms of spending power, the funds invested today won't have the same worth 10, 20, 30, or even 50 years from adjusting for inflation, which reached its peak of 9.1% June 2022.
Investors who try to trade their way to higher returns with short-term moves generally earn below-average returns utilizing strategies that require substantially more time and effort. They can also result in higher fees and taxes that further reduce gains.
If you're looking to build wealth, buy great stocks and hold them for as long as possible.
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