Why Palisade Helps Its Clients Stay Focused on the Long Term
Palisade maintains that the best way to weather the short-term volatility of the market is to remain invested for the long term. Our goal is to help our clients stay appropriately invested when everyone else is pulling out and locking in their losses.
This can be quite challenging when the markets are down, but it is helpful to remember that for a well diversified portfolio, the probability of a profitable return is directly correlated with holding period. As shown in the table below, the historical odds of a positive return increase dramatically as the holding period increases, with the S&P 500 having been profitable over every 20 yr period in history:
Odds of a Positive Return of the S&P 500
Based on monthly historical data from Jan 1928 to Dec 2023
| Holding Period | Odds of a Positive Return | |
|---|---|---|
| 1 month | 57% | ~ Coin toss |
| 1 year | 69% | ~ 2 out of 3 |
| 5 years | 79% | ~ 4 out of 5 |
| 10 years | 88% | ~ 9 out of 10 |
| 20 years | 100% | 10 out of 10 |
Data source: Motley Fool Investing
Another way to get an intuitive sense of this is to look at the range of historical market returns (the best and worst returns) for various holding periods. The chart below shows that from 1950-2025, stocks have had annual returns ranging from 61% at the high end down to -43% at the low end (gulp!). But those wild fluctuations attenuate as holding period increases, with the lowest return for any five yr holding period being -7%, and the lowest returns for any 20 yr holding period being a positive 4%.
Image source: JP Morgan Asset Management
“Time in the market beats timing the market.”
