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Stock market volatile annual returns

Stock market volatile annual returns

May 29, 2020

The formula for success is holding stocks for the long-term, writes Peter Watson.

Since 1926, as reported by S&P, the average annual return for the US stock market is very close to 10 per cent. That includes the Great Depression of 1929, one of many times the stock market crashed.

Returns vary between positive and negative. Three out of every four years, stocks had a positive return.

Which investment would you prefer?

Investment A. You will receive a long-term return of 10 per cent.

Investment B. Your annual return could be much higher than 10 per cent. However, your annual loss could be much greater than 10 per cent.

Hint. It is the same answer. Investors have a love / hate relationship with this type of investment.

Love it one year and potentially hate it the next.

Answer: Stocks.

Investors have been trying to figure out how stocks work for years. Owning stocks can seem like an obstacle course.

Navigating the market to determine what stock to buy and sell never seems to work.

Annual returns have ranged from plus 54 per cent to negative 43 per cent.

Predicting, or speculating, at how to manage your stock portfolio in the short-term often seems to fail.

There is no magic formula to short-term success.

There is magic in buy and hold.

The stock market has a pattern of how it operates. Some years are good, and some years are bad. The long-term annual returns have been excellent.

To harness the true potential of the stock market, have a long-term perspective and be patient during normal market ups and downs.

Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Watson Investments.