What does it feel like to make over 9% annualized return on your money? Money Not Math 138
If you had a $300,000 on 3/1/18, here’s what that looked like next 5 years:
3/1/18: $300,000
3/1/19: $317,265 (Annualized S&P 500 Return with Dividends Reinvested= 5.755%)
3/1/20: $305,923 (-3.575%)
3/1/21: $458,951 (50.022%)
3/1/22: $522,364 (13.817%)
3/1/23: $472,119 (-9.619%)
Here’s what that felt like:
3/1/19 😄 “I made over $17k”
3/1/20 😢 “I lost over $11k and COVID is happening 😨”
3/1/21 🥳 “I made over $153k!!!”
3/1/22 😄 “I made over $63k!”
3/1/23 🤬 “I lost over $50k!!”
This was roughly a 9% annualized return including dividends re-invested over a 5-year period with a total return of about $172k… but the path to get there is clearly inconsistent… AND THAT’S OKAY.
The point? Rather than try to force returns by trying to time the market or letting short-term events affect your long-term investment strategy. Allocate your money so that you can afford to stomach the volatility (build a Warchest) … Don’t risk the money that you need in the short-term, stick to your long-term plan, don’t let the short-term volatility drive your emotions, and give it time.
Here’s a link to a 5-year chart of the S&P 500 for reference: https://www.google.com/finance/quote/.INX:INDEXSP?sa=X&ved=2ahUKEwj3lvqckqX-AhVajIkEHTzTCGkQ3ecFegQIKxAg&window=5YNotice, the lowest 5-year point of the S&P 500 was during the 3/1/20-3/1/21 50% return year!
Disclaimer, this content is not legal, tax, or investment advice. You should always consult a qualified professional regarding your personal situation. These numbers are rounded and based on a hypothetical situation using data from https://dqydj.com/sp-500-return-calculator/ they DO NOT reflect an investor’s actual experience or predict future investor results.