The probability of a positive return from stocks increases over time. An investment in the US stock market grew wealth during 75% of the one-year periods between January 1926 and May 2023. Over ten-year periods, this occurred 95% of the time. While positive stock returns are never guaranteed over any horizon, no period exceeding 184 months (just over 15 years) has seen a negative return in the US.1
This is not meant to imply stocks are less risky in the long run. The range of stock market outcomes over long time periods is vast. The final value of a dollar invested in US stocks over one-year periods is vast. The final value of a dollar invested in US stocks over one-year periods between January 1926 and May 2023 has ranged from $0.32 to $2.63. Over 20 years, the gap between worst- and best-case scenarios was $1.45 to $28.62.1 That’s a cumulative return difference of more than 2,700 percentage points.
This level of dispersion among outcomes means stocks should not be considered “safe” over any time horizon. But disciplined, long-term investors whose goal is growing wealth have the odds stacked in their favor with a broadly diversified allocation to stocks.
Past performance, including hypothetical performance, is no guarantee of future results. Growth for $1 computed over rolling monthly periods for the S&P 500 Index assumes reinvestment of income and no transaction costs or taxes. Outcomes are reported for the minimum and maximum of these observations. The analysis is for illustrative purposes only and is not indicative of any investment. S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment.
- Growth of wealth computed over rolling monthly periods (1 year, 5 years, 10 years, 15 years, 20 years) for the S&P 500 Index. Percentages stated indicate periods with a positive gain. Dollar amounts are the lowest and highest historical results within each time range.
This article was provided by Dimensional Fund Advisors and we have been given permission to share this information with our clients and potential clients.