Why Aren’t My Investments Growing?

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Why Haven’t My Investments Grown as Promised?

Over the past year, you may have been asking yourself why your investments haven’t been growing. How come, even with all the money we’ve put into our 401k or brokerage accounts, the value still feels stagnant? How come we’re not reaping the benefits of compounding growth? 

Your questions wouldn’t be misguided. If you started tracking your investments sometime around 2021, it’s likely that they haven’t grown much. This is for a valid reason: the US stock market has stayed at the same level for the past two years. The value of bonds has also fallen by about 20% since that time, too. Both have been shaped by interest rates increasing from 0% to 5.25% during that time frame. 

The rather pathetic performance of your investments isn’t your fault – it’s just a function of the current environment.  “But, Jim, aren’t you concerned?” No, and I’ll tell you why in two words: historical context. 

When clients begin investing with us, we are clear that this is a long-term game, meaning anything more than 5-10 years. Under five years and what you earn in your investments is anyone’s guess. It’s actually over longer periods of time, ten and 20 years, that we can be more certain about how your investments will grow. I know that having more confidence in longer term forecasts sounds backward, but the numbers speak for themselves. 

Some Historical Context

Roughly speaking, one in every four years is a negative year for the stock market. Meaning three out of every four years, you make money. When you look at long term horizons

  • The rolling 1-year returns (which means every possible 1-year outcome) over the past 30 years was -43% to +65%. Wow. Talk about rolling the dice. 
  • The rolling 5-year returns (which mean every possible 5-year time frame over the past 30 years) has generated returns from -6%/year to +27%/year . 
  • The rolling 10-year returns (which mean every possible 10-year time frame over the past 70 years) has generated returns from -5%/year to +20%/year.
  • The rolling 20-year returns (which mean every possible 20-year time frame over the past 70 years) has generated returns from +2%/year to +18%/year (using data from the last 70 years). 
  • The rolling 30-year returns (which mean every possible 30-year time frame over the past 70 years) has generated returns from +8%/year to +15%/year. 

It’s clear from these numbers that the longer your time frame, the more predictability you have. And in fact, if you look at the typical  20-year time frame for investing or longer, your returns have never been zero!

Read More: Investing Should Be Boring

Here’s another way to look at it: If you take a 30-year time horizon, invest $1,000 a month and earn about 10% (at the low end of the historical range), you’ll have $2 million in 30 years. Pretty impressive! But if you invest $1,000 a month and returns are zero in three years, you have $36,000. It’s a big leap between those two numbers.

Read More: Investing Doesn’t Need to Be Fancy

I get that it’s frustrating to have worked hard at saving the past few years but see nothing in return for it. We want results now! But I urge you to keep a historical perspective. People tend to  make the mistake of pulling out of the market when things are down. That lack of trust in investing only robs you of its real, proven long term benefits. While Brandon and I plan for investing assuming much lower rates of return to create a margin of safety, it is our full expectation that if we stay the course, our clients will do much better. Waiting out your returns is one of the things that makes investing so hard, far above picking the right companies or socking away as much money as possible. Believing that things will work out in the long run, while tolerating the noise and volatility in the short run, is one of the reasons I think having a historical perspective is critical to success. 

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