Maintaining a Long-term Focus — The Stock Market’s History of Volatility & Growth

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(Graph | Courtesy of Cornerstone Financial Planning Group)

Given the recent stock market volatility, I thought it would be helpful to look back in history on other major market declines, and long-term performance of stocks compared to other “safer” asset classes. When investing for the long term, it’s important to keep in mind that while stocks have far outperformed other investments over the long term, they have also been subject to short-term periods of sharp decline. The graph below illustrates the growth of hypothetical $10,000 investments in stocks, bonds and money market securities over the last 50 years.

Notice that during this 50- year period, stocks have provided vastly superior long-term performance than bond or money market investments, but at the same time have subject to a far higher level of short-term volatility. This volatility is illustrated by the more dramatic peaks and valleys of the blue line depicting stock market performance. Note that at the end of the fifty-year period, the $10,000 stock investment has grown to nearly three times the amount of the bond investment, and more than five times the amount of the money market investment. Included in this 50-year period were the “2nd Black Monday” stock market crash of 1987, the “dotcom bust” crash of 1999-2000, the “Great Recession” crash of 2008 and the “Coronavirus” crash of 2020. Following these and other significant stock market declines, the market rebounded to eventually reach new record highs. While past stock market performance is not a guarantee of future results, the historical performance of the market suggests the stock market will eventually recover from its sharp periods of decline.

Provided by Ed Wettig, CFP, Cornerstone Financial Planning Group, which offers investment management, financial planning and retirement income strategies. Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation, a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Ave, Carpinteria, CA 93013, 800-874-6910. Cornerstone Financial Planning Group and PlanMember Securities Corporation are independently owned and operated. PlanMember is not responsible or liable for ancillary products or services offered by Cornerstone Financial Planning Group or this representative.

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Cornerstone Financial Planning Group offers investment management, financial planning and retirement income strategies. Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation, a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Ave, Carpinteria, CA 93013, 800-874-6910. Cornerstone Financial Planning Group and PlanMember Securities Corporation are independently owned and operated. PlanMember is not responsible or liable for ancillary products or services offered by Cornerstone Financial Planning Group or this representative. cornerstonefinancialbend.com

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