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How does $100 become $1,378,061?

Posted on Tuesday, February 14, 2023

The 100 year average for the S&P 500(r) is about 10%. 10% sounds pretty great! But, it is imperative as an investor to understand the resolve it takes to get that 10%. Let’s consider someone born in 1922 with a $100 gift. At 10% on average each year, that $100 would be $1,378,061.23 today. Not bad! Now, let’s review the journey of that $100 required to achieve the average.

  1. Your $100 NEVER returned its 10% average. In fact, the S&P 500(r) only returned between 8-12% a total of seven times. That’s a lot of variability.
  2. Your $100 experienced a 10% pullback every year, on average.
  3. Your $100 experienced 26 bear markets lasting 289 days on average. That’s one about every four years.
  4. Your $100 experienced 15 recessions. Yes, 11 bear markets occurred without a recession.
  5. Your $100 experienced 28 bull markets lasting 991 days on average. That’s over 3x the average length of a bear market.
  6. Your $100 increased 53% of days, but 80% of years.
  7. Your $100 experienced countless wars, regime changes, pandemics, social revolutions, and economic challenges.

The reality is capital markets ARE the crystal ball. The economy follows. We never know when markets will go up. The most important challenge is sticking with it when times are difficult, ensuring you’re participating during all of those positive days and time periods. October 2022 was the best month for the DJIA since 1976 - discipline to start Q4 2022 paid off to those who had it!

Sources: dimensional.com, finance.yahoo.com S&P 500 (r) 1922-2022, Hartford Funds '10 Things You Should Know About Bear Markets', seekingalpha.com, wsj.com 'The Dow Just Notched its Best Month Since 1976'

This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.

Index Disclosures:

Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

S&P 500®: The S&P 500® index is an unmanaged index of 500 companies used as a representative sample of the United States economy. The S&P 500® index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.

The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 actively traded “blue chip” stocks, primarily industrials, but includes financials and other service-oriented companies. The components, which change from time to time, represent between 15% and 20% of the market value of NYSE stocks.

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