Traders react after the closing bell on the floor of the New York Stock Exchange (NYSE) in New York, Dec. 13, 2023.
Brendan McDermid | Reuters
No matter how you feel about the world today, you’re probably happy the stock market.
The S&P 500 up almost 30% so far this year.
But it’s important for investors to temper their expectations and remember that years like this are raresaid Cathy Curtis, certified financial planner and founder and CEO of Curtis Financial Planning in Oakland, California.
“Investors should know that the stock market has averaged more than 10% annual return for decades,” said the Curtis member. CNBC Advisory Board.
“It has grown above that number in the last year and it would be very unusual for that to continue over a multi-year period,” he added.
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In fact, the S&P 500’s return to 2024 has been higher in only 17 of the past 74 years, Morningstar Direct found. For example, in 1954, the S&P 500 rose by more than 52%. In 1989 about 31% returned.
(Financial services companies, for how many years since 1950, the index has grown by more than 29.24%, its exact return through 2024, as of Wednesday’s close.)
These are significant gains for multiple years in a row even rarer.
The S&P 500 is up more than 24% in 2023, and if the index rises more than 20% this year, it would be the third time in the past century that such gains have been made, he said. Deutsche Bank.
Just because market gains are unlikely going forward doesn’t mean you should sell your stocks, Curtis added.
“The best way to take advantage of the annual return is to stay in the market,” he said.
Ups and downs are a sign of a healthy market – and You will benefit if you continue to invest.
Years like these can help offset periods when the market is in the red. The S&P 500 fell over 36% in 2008. In 2022, it dropped to over 18%.
“We have a ‘recent bias,’ so there’s a tendency to follow recent performance,” said Allan Roth, a CFP and accountant with Wealth Logic in Colorado Springs, Colorado.
“But reversion to the mean is statistically much more likely,” Roth said.
