top of page

In A Time Of Crisis, Find Comfort In History

Updated: Sep 27, 2022

Even in normal times we are always on the lookout for fresh ways to clearly demonstrate how investing in the stock market simply works in our neverending goal of capital growth. During a crisis, this task takes on even greater importance. People tend to get emotional, letting their mind(s) get filled with worst case scenarios, and either suffer high levels of consternation (“should I sell”) or even worse… sell their investments. Luckily, to ease your worries, the folks at Visual Capitalists put out this wonderful graphic... The Pyramid Of Equity Returns. Needless to say, I think it’s worth sharing and briefly discussing.

The graphic charts the total annual returns for U.S. stocks over nearly 200 years. It

categorizes each year into 10% return brackets. Visually, you can quickly ascertain that historically, the stock market has experienced more positive years than negative years. But, to what degree?

On an annual basis,

· 71% of the time the stock market experiences positive returns,

· 47% of the time the stock market has a return greater than 10%,

· 87% of the time the market does better than -10%, and

· In the past 46 years, the stock market has finished the year down more than 10% only three times. Let that sink in for a minute.

From 1825 – 2019, the average annualized return of the stock market was 8.25%... not too shabby!

Clearly, in most years, the stock market has a penchant to head north rather than south. Why is this? As we like to say regarding anything we see occur over and over again… this is by design. In this case, to simplify, the stock market represents the current and future value (earnings + anticipated future earnings) of real life companies. And these companies are in the business of improving our lives in return for your hard earned dollars. It has gone on for years and will continue into the future. Our lives will be better 10, 20, 30 years from now and so will the stock market… all by design!

When the stock market corrects again (as it wll at somepoint) remember the Pyramid Of Equity Returns. Two centuries of facts has to give even the most worrisome investor some comfort. I know it does for me.

Note: Nothing contained herein this letter should be considered to be investment advice, research or an invitation to buy or sell any securities. The charts above is from Vision Capital.


bottom of page