Understanding investment markets can be difficult, as there’s so much information to sort through. Fortunately, you don’t need to understand every single concept or piece of data to have success as an investor.
A few important, simple and often surprising investment statistics can guide your choices and make you a better investor in the long term. Here are a few worth considering.
1. The Annual Return of the S&P 500 (10% Per Year)
The stock market has been a consistent way to build wealth over the past 100 years. Likewise, from April 1, 1936 through March 31, 2024, the S&P 500 Index–a widely followed barometer for the broad U.S. stock market–averaged an annual return of 10.75%.
To put that return into perspective, if you earn 10% per year on your savings, and your gains compound quarterly, you’ll double your money roughly every seven years. Put $20,000 in an S&P 500 fund today, and if you earn the historical return of 10% per year, you’ll have $40,000 in about seven years.
Of course, the stock market is unpredictable and goes through swings. Your portfolio might go down some years and up by more than 10% in others. The key takeaway is that the stock market posts a substantial average annual return over time.
2. The Average Annual Inflation Rate (3.8% Per Year)
Inflation is another reason why it’s essential to invest. When prices go up, the purchasing power of each of your dollars goes down. On average, U.S. inflation has been 3.8% percent per year from 1960 to 2022. If you aren’t earning at least that much on your money, it’s losing value. Your balance might stay the same in a bank account, but it buys less and less, making you poorer.
Investments like stocks historically outperform inflation. By investing some of your money in stocks and stock funds, your savings and spending power can keep up with rising prices.
3. The Number of Active Day Traders Who Lose Money (80%)
Using an index fund, you can often match the performance of the entire S&P 500 and various major stock markets. This is different from buying and selling–or trading–individual stocks. Trading individual stocks can be exciting when it succeeds, leading sometimes to sharp short-term gains, but profiting consistently is very hard.
In fact, 75% of day traders trying to invest professionally quit within two years, and 80% of their trades are unprofitable, according to a University of Berkeley study. And individual stock day traders working through a taxable account often generate short-term capital gains, which are taxed at higher ordinary income rates than long-term capital gains. Day traders can also trigger a lot of investment fees. Also, as a day trader you’re competing against the best professional investors on Wall Street, many backed by big research teams.
Most regular investors are better off using mutual funds and exchange-traded funds, or ETFs, that aim to match the stock market instead. It’s less exciting but still lucrative in the long term.
4. The Cost of an Index Fund vs. an Active Fund for a $1 Million Portfolio ($1,200 vs. $6,000 Per Year)
If you’re trying to pick an investment fund, consider the cost. An index fund keeps costs low by simply trying to mimic the performance of a specific segment of the market. The S&P 500 is one. It consists of 500 of the largest companies listed on U.S. stock exchanges. The Nasdaq 100 consists of stocks issued by 100 of the largest nonfinancial businesses listed on the Nasdaq stock exchange.
Many index funds track each of those groups. Generally, their costs are kept low because they don’t have to pay for lots of investors, analysts and software wizards to find stocks. In contrast, actively managed funds do pay for talented people who can pick stocks that outperform. Those costs get passed on to shareholders like you.
Index funds, on average, charge 0.12% per year versus the 0.60% charged by active investment funds. That means on a $1 million portfolio, you’d pay $1,200 per year for an index fund versus $6,000 a year for an active fund.
Despite charging much more, 79% of active funds, trying to earn higher returns, underperformed the S&P 500 in 2021. Often, you’re paying extra fees for actively managed funds without getting any additional return in exchange.
5. The Average Length of a Bear Market (14 Months)
One drawback to investing is that your returns are not guaranteed. In some years you’ll earn a lot. In others, your portfolio could lose money. It’s not fun to lose money, but during this stretch, remind yourself that the market will turn around eventually.
The average historical bear market, a period when stocks are losing value, has lasted 14 months. On the other hand, the average historical bull market, when stocks go up in value, has lasted five years.
The market will go through cycles of gains and losses. Remember that the positive stretches last longer than the negative ones.
6. The Number of ‘Best Investing Days’ That Can Turn a Positive Portfolio Negative If Missed (20 Days Over Two Decades)
When the market crashes, you might feel tempted to cash out and wait until things start picking up again. This is one of the most expensive mistakes investors make.
Why is that? Because so much of the stock market’s long-term returns come from single-day gains. The market sometimes shoots up by 5%, 7% or even 10% in a single day. Those days are impossible to predict. And they often occur at the start of a rally.
Individual retail investors often miss those explosive, unexpected upturns because they cashed out or moved to bonds amid the market’s earlier downturn.
A JPMorgan report found that if investors missed the top 10 best days of investing over a two-decade period from January 1999 to December 2018, it cut their portfolio return in half. If investors missed the top 20 best investing days, their return turned negative, meaning that they lost money over that two-decade period. Don’t try to time the market. Stay invested for the long term for the best results.
7. The Monthly Investment Needed to Reach $1 Million If You Start at Age 25 vs. Age 45 ($350 vs. $1,650)
The earlier you start investing, the more time you have to build wealth. This makes it easier to hit your long-term financial goals.
Let’s say you want $1 million in your nest egg for retirement at age 67. You expect to earn 7% a year, a reasonable return for a portfolio of stocks and bonds. If you start at age 25, you would need to save about $350 per month. If you start at age 45, you must save around $1,650 a month.
If you’re still early in your career, consider ways to save more money. Even a little extra today will make reaching your future financial goals easier. Don’t get discouraged if you are later in your career. You may wish you had started earlier, but anything you put aside now will help you once you retire. As the saying goes, perhaps the best time to start was years ago, but the second-best is now.
8. The Number of People With a Workplace Retirement Plan (44%)
A workplace retirement plan, like a 401(k), can help you invest. Those plans let you save money and defer yearly tax on growth in your investments inside your account. With a traditional 401(k), you also get a tax deduction for the money you kick into your account. In most cases, your employer also contributes to your account.
Only 44% of American workers have access to a workplace retirement plan. If you have one, study how it works to take full advantage.
The majority of workers, 56%, do not have a retirement plan at their job. Consider an individual retirement account, or IRA, if you are in that situation. It offers similar tax advantages for your retirement savings and investment goals.
9. The Expected Life Expectancy of Males and Females Turning 65 (82 and 85 Years)
The top reason most people invest is to save for retirement. And retirement might last a lot longer than you expect. The typical male turning 65 today is expected to live until 82, while females are expected to live until 85, according to the Social Security Administration.
That is a retirement lasting an average of nearly two decades. Some people will live even longer, reaching 90, 100 or even older. This is why saving and investing regularly is important—to build extra savings to fund your retirement lifestyle.
10. The Average Baby Boomer 401(k) Balance ($230,900)
Fidelity measured the average 401(k) balance by age of its customers. This can give you an idea of where your savings stack up against your peers:
Gen Z: $9,800
Millennials: $54,000
Gen X: $165,300
Baby Boomers: $230,900
This represents investments in a 401(k). People may have more money in an IRA or other investment account. Still, those figures show that the typical person does not retire with $1 million. Therefore, you shouldn’t feel behind if you’re just starting to save for retirement. Do what you can to beat these averages and grow your portfolio.
Hopefully, these statistics help shed some light on the importance of investing and investing wisely. Consider meeting with a financial advisor to discuss your portfolio for more advice.
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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
