Here are the monthly returns for the S&P 500 since 1871. Chaotic. Sometimes terrifying. Sometimes very exciting. This is the market in which we live. These are the sometimes great and sometimes awful returns that make us greedy, euphoric, panicked, and fearful. These returns do not matter.
Here is what happens when you take these same monthly returns and compound them over 20-, 30-, and 40- years. These returns are hard to feel but they are the only ones that matter. If you are young, and you are a real investor, remind yourself that these long-term numbers are all that matter. This reminder is especially important on days like today, when the market is down 2.5%.
Frame things right, and you’ll navigate the tough times just fine. Emerson said it best: “The years teach much which the days never know.”