Yesterday, I wrote about how, on a historical basis, keeping money in the market increases the odds of a positive return. Since I only showed those odds going out one year, I wanted to push the time frame long enough such that an investment would always return a positive gain:
Taking historical data back to 1928, you would need 25 years to guarantee a positive return in your investment. That’s a long time! Mostly because, that captures the Great Depression and if you were the unlucky person who bought at the very top before the crash, then, yeah, you needed 25 years to see green.
If you think the stock market crash seen during the Great Depression can never happen again, or was some kind of anomaly that couldn’t be as severe in today’s age, then maybe you want to know what your odds are without that data in you sample. That gives us the lighter line on the chart. And, it’s even better odds, which is unsurprising since we removed the worst years on record. Having done that, holding for just 14 years would be enough to guarantee a positive return.
The bottom line is, when you put money in the stock market you don’t want to sell for a good period of time. Maybe your investment doesn’t do so well or maybe you buy into a peak right before a crash. That’s unlucky but you can still leave a winner if you sit tight and stick to a sound strategy - patience!