Hypothetical value of $1 invested at the beginning of 1927 and kept invested through December 31, 2016. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. Total returns in U.S. dollars. Past performance is no guarantee of future results.
U.S. Stock Market represented by the Fama/French Total US Market Index Portfolio, which is an an unmanaged index of stocks representing stocks of U.S. companies. U.S. Small Cap Stocks represented by the Fama/French US Small Cap Index, which is an unmanaged index of stocks of small U.S. companies. U.S. Value Stocks represented by Fama/French US Large Value Index (ex utilities), which is an unmanaged index of stocks of large U.S. companies with low relative price, excluding utilities companies. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Long-Term Government Bonds, One-Month U.S. Treasury Bills, and U.S. Consumer Price Index (inflation), source: Morningstar’s 2016 Stocks, Bonds, Bills, And Inflation Yearbook (2016). Indexes are unmanaged baskets of securities that investors cannot directly invest in. Index performance does not reflect the fees or expenses associated with the management of an actual portfolio.
The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer’s creditworthiness declines, and are subject to availability and changes in price. T Bills and government bonds are backed by the U. S. government and guaranteed as to the timely payment of principal and interest. T Bills and government bonds are subject to interest rate and inflation risk and their values will decline as interest rates rise. The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.
This article is featured in the spring edition of our 360 Insights Quarterly Client Newsletter.
One of the best opportunities to grow your money over the long term may come from making an investment in the stock market.
This chart illustrates the long-term growth of U.S. businesses over the past 90 years. If your grandparents had invested $1 in the U.S. Stock market, as measured by the Fama/French Total US Market Index, in 1927 and just left it alone, by the end of 2016 that $1 would have grown to $5,106. Invested in U.S. Small Cap Stocks, as measured by the Fama/French US Small Cap Index, that $1 would have grown to $24,586, and $8,050 if invested in U.S. Value Stocks, as measured by the Fama/French US Large Value Index. That same $1 invested in One-Month T-Bills would be worth $20 and if invested in Long- Term Government Bonds it would be worth $125.
Those who invested $1 back in 1927 would have had plenty of reasons to want to pull out of the market along the way — The Great Depression, World War II, Korea, Viet Nam, stagflation, the Great Recession — but by staying invested they could take advantage of every market recovery.
While we can never be certain about market direction in the short term, over the long term we believe patient investors will be rewarded for staying invested.