Does Focusing on the Long-Term Payoff in Investing?

Seeing is Believing.

December 7, 2022. By Ashley Agnew:

From the time we are young we are asked to believe in that which we cannot see during the holiday season. During childhood happy hints support the ask, like flakes of snow on Christmas morning, cheer in unexpected places, or receiving surprise gifts wrapped in ribbon so perfectly they must have been completed by a special set of elves. In my house growing up, even the faint sound of jingle bells could be heard each year just as I drifted off to sleep on December 24th.

As adults, the magic of believing fades as an evidence-based reality rarely asks us to trust in things we cannot see.  This is certainly true when investing. This year, however, a common challenge for investors is to have faith that the stock market will eventually provide a consistent positive return. Luckily there is a bit of evidence that can be entered into judgement in support of favorable performance returning once again.


The chart above shows the frequency of S&P 500 rolling periods with positive returns. History cannot guarantee future performance, but the trend can lend some perspective to expectations, and perhaps a sigh of relief:

  • If you picked any one day to invest since 1945, the next day you would have a positive return 54% of the time
  • 81% of the time your investment would have been positive after 12 months
  • 90% of the time your investment would have been positive after 5 years

And so on and so forth; as the period elongates, probability of positive return increases. The small percentage of times you would have a negative return over 10 years assumes you bought at the highest levels during the tech bubble in 2000-2001 and sold at recessionary lows in 2008-2009.

In conclusion, while both red and green are deemed traditional Christmas colors, we’d be much more comfortable seeing a bit less red these days. Greener days are on the horizon, however, and allocating your focus to the magic of the season rather than the stress of the markets may be the best way to spend your time in the final weeks of the calendar year. Believe that your long-term discipline will pay off and it just might sooner than you think.


The information and analysis expressed herein is for general and educational purposes only. You should make your investment decisions based on your personal financial goals and the reward/risk level with which you feel comfortable.  Investing involves risk, including the potential for loss of principal.  Past performance does not guarantee future results. Please consult Centerpoint Advisors, LLC about your investment needs, investment objectives, risk tolerance and any changes in your life that may impact your financial objectives.