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Stock Market Returns can be Misleading

Stock Market Returns can be Misleading

February 20, 2023

Investors short- term and long-term experience is often very different, writes Peter Watson.

Understanding how the stock market performs can be very misleading to how risky and unpleasant the investment experience can be.

We have a perfect example of this over the last three years. From 2020 to 2022, the US stock market had a cumulative gain of 22.7 per cent as measured by the Russell 3000 Index.

That was a very respectful appreciation in value. Look beneath the surface and you can understand these years have been very difficult for investors. The world suffered through a global pandemic, Russia’s war in Ukraine and unexpectedly high inflation.

Early in the year 2020 the US stock market had declined more than 20 per cent. Later that year in September and October the stock market values decreased.

The year 2021 had a negative month in January; however, by the end of the year the US stock market had appreciated over 25 per cent.

Investors do not like volatility. When stock markets are volatile the emotional roller coaster feeling experienced by investors is extremely volatile.

The obvious question is why anybody would invest in stocks. Bonds are much less volatile and don’t keep their investors awake at night.

Welcome to the world of investing. As a long-term investor, investing in stocks has been very rewarding. We all enjoy investing for the long term.

Unfortunately, the long-term is made up of many segments of short-term and that can be hard on the nerves.

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. Only investment-related products and services are offered through Watson Securities of ACPI. Peter Watson provides wealth management services through Watson Investments. He can be reached at