by Adam Netland

Does recent market volatility have you worried? Time is on your side.

Looking at your investment statements and seeing they’re worth a little less than they were a few months ago can be discomforting. What’s an investor to do? To be a disciplined investor, sticking to your investment strategy is important, and sometimes looking at things from a historical perspective can reaffirm what you’re trying to accomplish in the future. You’ll see that the key here is not so much market timing as it is time in the market.

For this article, annual historical returns comparing the stock market and U.S. Treasury Bills (t-bills) are studied over a 70 year time span (1934-2003)*.

In any given 1 year period, stocks have outperformed t-bills 64.3% of the time. Over any given 5 year period, stocks have outperformed t-bills 81.8% of the time. Over any 10 year period, stocks have outperformed t-bills 88.5% of the time, and over any 20 year period or more, stocks have outperformed t-bills 100% of the time. As you can see, the longer the investment period, the more it makes sense to be invested in stocks.

So during these volatile times, if you’re concerned about your investments, ask yourself two questions; 1) Do my investments make up a portfolio that’s appropriately diversified? 2) How long of a time frame until I need to withdraw from my investments? With diversification, the longer your time frame, the less need there is to be stressed about the day-to-day market fluctuations. And if your timeframe is shorter, incorporate other investments such as diversified bonds to help make sure you don’t lose sleep at night. If you have concerns, speak with your Financial Advisor to make sure your portfolio is in line with your objectives and time frame.

*Stock prices before 1950 from the Dow Jones Industrial Index; stock prices after 1950 from the S&P 500.