facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Stocks: The 3 Out Of 4 Rule Thumbnail

Stocks: The 3 Out Of 4 Rule

The current market downturn has led some investors to question their tolerance for taking on the risk accompanies investing in stocks. Volatility and downturns are inevitable, but the good news is that there are far more positive years than negative ones. 

The chart below looks at annual US stock market returns from 1926 through 2021. With almost 100 years of history, returns have been positive in about 3 out of every 4 years.

Reaping the benefits of the stock market requires being a long-term investor. It can be challenging to stick to an established financial plan during a downturn, but it's the most effective strategy to capture a future recovery.

Distribution of US Market Returns, CRSP 1-10 Index Returns by Year, 1926-2021

In US dollars. CRSP data provided by the Center for Research in Security Prices, University of Chicago. The CRSP 1-10 Index measures the performance of the total US stock market, which it defines as the aggregate capitalization of all securities listed on the NYSE, AMEX, and NASDAQ exchanges. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

David Rappaport, CFP®
David is the Co-Founder and Chief Investment Officer of Rappaport Reiches Capital Management. He acts as personal CFO to entrepreneurs and corporate executives, providing organization and clarity in their finances. Please connect with David below. He loves to talk about investing, financial planning, and Aspiritech, a non-profit hiring individuals on the autism spectrum.

The author does not intend to provide investment, legal or tax advice as these materials are for general educational purposes only.  Please consult your legal, tax or investment professional for advice on your particular situation. This material is derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. It is not intended to be a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results. Please refer to RRCM’s Form ADV Part 2 for additional disclosures regarding RRCM and its practices.