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Overwhelmingly Positive Returns

Overwhelmingly Positive Returns

March 09, 2023

Overwhelmingly Positive Returns


You may be asking: “What the heck is he talking about?” Truth is that I am talking about the stock market….shares of companies traded on stock exchanges in both the U.S. and foreign markets.


“This cannot be right. The stock market is volatile. What about all the bad years like 2022 or 2008?” All good questions. And some very good answers will follow. So please read more.


The stock market is not intuitive. A section of the human brain known as the amygdala, or reptile brain, is part of human genetics that protected our ancestors from wooly mammoths and saber tooth cats; saved the lives of many solders in time of war; and warns us not to hang out in biker bars. (1)


For some people, their reaction to a stock market decline is similar to the smell of smoke inside a movie theater. RUN. Uncertainty in domestic politics, wars that threaten to escalate or begin, inflation, and rising interest rates all speak “caution” to our amygdala. During times of uncertainty, our reptile brain encourages caution. The smell of smoke may be a sign of impending danger, as would be someone carrying an AK47 into the Mall. A stock market decline is very different. Please, stay with me and follow along.


The S&P 500 came into 1980 at around 108. It ended 2022 at 3,839. This is an annual average return of 8.87%. (2) The cash dividend on the S&P 500 increased from $9 in 1980 to $66.92 in 2022. (3) This is a 4.9% per year increase. Totaling the two equals a 13.74% per year return. Therefore, the title, Overwhelming Positive Returns.


Yes, stock market declines happen regularly. The average annual mid-year decline (peak to trough) of the S&P 500 has been 14% since 1980. Twice it declined as much as half. Yes, you read this right. In fact, the market is down almost every year at some point during the year. But 3 of every 4 years is a positive return; as is 9 of every ten years. The stock market goes down. But how long does it stay down?


So if returns are almost always positive, with some bumps along the way, how can you analyze the two very different perceptions of reality? How can the stock market have all these horrible events and still make all these great returns? Which perception is creating your “reality?” Two factors create the conflict.


One factor is your focus. What gets your attention? The second factor is what you do with your attention?


Are market declines a time to buy or sell? Are up-markets the time to buy or sell? What do you think?


Your answer will have a huge impact on your result.


If you are a seller when the markets are down and a buyer when markets are doing well, I would propose your results will not be optimal. You are responding to the wave of emotion driving markets both up and down. You are selling based upon your reptile brain telling you to run from danger and then later buying because you have fear of missing out on the profits. Or put another way, you are selling low and buying high.


Rather than focus on either good or bad events in the stock market, let’s look at the odds of making money merely by staying in the market --- avoiding all the getting in and out and making or worrying if this is a good or bad decision to be in or out. Merely, get into the market and then stay in.


Just pretend you got into the market and didn’t mess with it. What has happened? I will use data from 1926 through 2022 and use the S&P 500 (with dividends reinvested) over various rolling time frames. The figures below provide the percentage of positive returns over the different rolling periods: (2)

  • 1-year: 75.28%
  • 3-year: 84.41%
  • 5-year: 88.42%
  • 10-year: 94.55%

This means that over the past 96 years, the S&P 500 was up 3 of every 4 years. Over any three-year period, you made money 84% of the time and this jumps up to 88% over all five-year periods and 94% over each and every ten-year rolling period.


This is how I can say “Overwhelmingly Positive Returns” are the norm and not the exception. These numbers are portfolios of 100% stocks with no dilution due to bonds or cash.


Getting in and out of the market and then back in the markets will in all probability provide sub-optimal results. More often than not, this kind of reactionary investing may offer feelings of “being in control” and minimizing losses but the unfortunate reality is that you may be only minimizing profits.


Then there are the people sitting on way too much cash who are fearful of “getting in at the wrong time” or worse yet waiting for the next disaster that forces the market down 30% for a few weeks or months and then they plan to swoop in and buy while the market is down. All I can say is, “Good luck with that philosophy.”


Remember, the stock markets (meaning S&P in this discussion) go up four of every five years. And sometimes, markets go up for eight or ten years running and then down for a year or eighteen months. So while you are waiting for the next decline, markets go up for several years and you are still waiting for the “perfect buying opportunity.”


What is your priority? Making money? If yes, then how much? When do you need to spend money? How much? Is this all of your money? Or merely a portion of your investable net worth? Will some short-term losses affect your ability to pay bills or buy groceries? I am talking about your financial reality. This is how to best make financial decisions. Facts, figures, needs, wants, and above all reality.

Talk to your financial advisor, or call us, about your financial / investment priorities? Create a plan that can accomplish your goals but is also something you can be comfortable with.


1. Sullivan, James. “Know Your Brain: The Amygdala- Unlocking Your Reptilian Brain.” BrainWorld https://brainworldmagazine.com/know-your-brain-the-amygdala-unlocking-the-reptilian-brain/

2. “S&P 500 Return Calculator with Dividend Reinvestment.” Dqydj.com https://dqydj.com/sp-500-return-calculator

3.“2022 was a record year for US dividends.” Dividend Growth Investor Newsletter https://www.dividendgrowthinvestor.com/2023/01/2022-was-record-year-for-us-dividends.html


The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed by a third party to provide information on a topic that may be of interest and is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

"The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.


Wollman Wealth Designs, Inc is a financial planning and investment advisory firm in Escondido, CA partnering with families, friends and clients in San Diego County and around the country. Please visit our website, call the office or send us an email with your comments or questions.