Stock market slides over a few days or months may lead investors to anticipate a down year. But that fallacy is easily disproven by examining a broad U.S. stock market index, which had positive returns in 17 of the past 20 calendar years, despite notable dips in many of those years. Even in 2020, when there were sharp market declines associated with the coronavirus pandemic that brought returns to negative 35% at one point, U.S. stocks ended the year with a gain of 21%.
Figure 1 shows yearly returns from 2002 through 2021. A few takeaways:
- Intra-year declines for the index ranged from 3% to 49%.
- In just 3 of the past 20 years annual returns were negative, and in 17 years returns were positive.
- In 13 of the past 20 years, annual returns were well above our long-term expected return from equities of 7%.
Volatility is a normal part of investing. Tumbles may be scary, but they shouldn’t be surprising. A long-term focus can help you keep perspective.
U.S. Stock Returns by Year and Largest Intra-Year Decline
2002 – 2021
Graphic provided by Dimensional Fund Advisors LP, an investment advisor registered with the Securities and Exchange Commission. Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Investing risks include loss of principal and fluctuating value.
Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
In US dollars.
Data is calculated off rounded daily returns. US Market is represented by the Russell 3000 Index. Largest Intra-Year Decline refers to the largest market decrease from peak to trough during the year. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes.
Investing risks include loss of principal and fluctuating value. There is no guarantee an investment strategy will be successful.