Just as compound interest can dramatically grow your wealth over time, the longer you invest in stocks, the better off you will be. With time, your chances of making money increase, and the volatility of your returns decreases.
From 1926-2011, the average annual return for the S&P 500 stock index (including reinvested dividends) for a single year has ranged from negative 43% to positive 54%, while averaging about 10%. Five-year average annualized returns have ranged from about negative 12% to positive 24%.
These returns easily surpass those you can get from any of the other major types of investments. Again, as your holding period increases, the expected return variation decreases, and the likelihood for a positive return increases. This is why it is important to have a long-term investment horizon when getting started in stocks.
Why Stocks Perform the Best >>