Financial Industry Insights from Advisors Asset Management


AAM Viewpoints – Time is an Investor’s Greatest Asset

Key Takeaway

The longer the time horizon, the lower the chance of volatility, and the potential more stable average return.

The New York Stock Exchange was founded over two centuries ago, in 1792. Since its founding, it has faced a plethora of destructive events: The Napoleonic Wars, U.S. Civil War, WWI, The Spanish Flu, The Great Depression, WWII, The Cold War, Korean War, Vietnam war, Gulf Wars, Great Recession, and now the COVID-19 pandemic. The point is that there has always been uncertainty; there has always been a “reason” to stay on the sidelines. But we’ve found there’s far more to potentially be lost from letting uncertainty keep you out of the market, than by staying in. Let’s pretend an immortal investor let uncertainty keep them out of the market, they would have missed out on the Industrial Revolution, Containerization, Globalization, and the fastest pace of technological advancement humanity has ever seen. We believe there is a greater “risk” to staying out of the market, than in. Time is an investor’s greatest asset.

To show just how powerful an investor’s time in the market can be, we calculated rolling period returns for the S&P 500 based on daily pricing data going back to 1928; meaning we calculated the return for every possible start and end date since 1928 for various holding periods (daily pricing data removes market timing as a factor). For a one-year holding period, there were 23,065 returns calculated, of which 70% were positive and 30% negative. The table below shows the extreme variability between the maximum and minimum return of each one-year period. But as the holding period gets longer, the spread between the maximum and minimum annual return gets narrower and the number of times the market experienced a negative return gets smaller. In fact, there were 17,018 rolling period returns calculated for the 25-year holding period, and none of them were negative. We think it’s remarkable that the market weathered all the events we previously listed and came out on top. So, remember, there will always be some uncertainty investors will have to face, but with a 10, 20, or 25-year time horizon, we believe it has the strong potential to be overcome. The chart and table convey a lot of information, but we feel the main takeaway is as an investor’s time horizon extends, their predicted volatility reduces, and their average return stabilizes. 

S&P 500 annualized rolling period return performance
Past performance is not indicative of future results.

S&P 500's max/min annualized rolling period returns
Past performance is not indicative of future results.

Footnote: For those wondering when the S&P 500 had a one-year return of 171.11%. Returns of that size took place between July 1932 and July 1933. They followed the worst one-year return of -70.84%, that took place the year before. 

CRN: 2020-1102-8690 R

This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit



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