1,982% Return: Are You Willing to Do What It Takes? | AWM Insights #132

In business and sports, everyone dreams of the payoff. A company that sells for billions and an athlete that signs the big contract. Yet, every owner and athlete who has achieved this will tell you the sacrifice and resiliency it takes to survive the gauntlet of the journey.

1,982% cumulative return over 30 years. 9.2% annual return$1 invested grows to $20.82

We all want the payoff. Few will do what it takes. 

Are you prepared & willing to?

The purpose of investing is to put your money to work and build wealth. The growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff.

To capture the returns above you had to stay invested when every fiber of your being was telling you to get out. 

-49% annual return in 2001-57% annual return in 2008-34% annual return in 2020

It’s what I imagine an ironman athlete feels like when they get off the bike to realize 26.2 miles stand between them and the finish line.

Returns are not given. They are earned. 

2022 is testing our convictions. As of 10/14/2022, the S&P 500 return is -24.43%

The most common question is can’t we avoid the pain? Don’t we know what’s coming? For instance, the current inflationary environment won’t last forever. Should we be on the sidelines until things return to normal?

Here’s the thing, this time is normal. 

This is a well-functioning market. It's doing exactly what it should be doing. Lots of uncertainty, high inflation, things are changing, and the markets reacting, all those things are normal.

Even if we can reasonably know what the future may look like, markets remain unpredictable in the short term.

There are 10,950 days over 30 years. Missing less than .5% of the days can be catastrophic.

$1 invested in the S&P 500 on Dec. 31, 1991, and held the position until Dec 31, 2021, grows to $20.82 for a 1,982% cumulative return.However, if you missed the 50 best days, you would only have $1.62.

It’s not enough to want to stay invested long-term, it’s having the capacity to do so. 

The biggest mistake we see amateur investors make is not having an adequate amount of money set aside to provide for their essential priorities (expenses) over the next few years. Without this protective reserve, they are forced to panic and sell out of the market and turn what should be temporary unrealized losses into permanent losses. 

At AWM, we are evidence-based investors. The history of the markets tells us we should expect short-term periods of temporary declines which is why we build your financial structure with a protective reserve. Your protective reserve allows you the capacity to meet your short-term priorities and remain invested for the long term giving you the best opportunity to capture the returns you deserve. 

As advisors this is not just the advice we provide to our clients, this is how our families’ financial structures are built. We are in the trenches by your side watching our investment balances temporarily decline. The confidence we have is that when times were good, we were building our bunkers to weather the storm. 

We encourage you to do what it takes. It’s never a comfortable straight-lined journey, but staying the course is how you secure your family’s future. 

DISCLOSURES

Source: Portfolio Advisory Group

This information is for illustrative purposes only. Data is not inflation adjusted and is derived from the S&P 500 index from 1/1/1991 to 12/31/2021, including the reinvestment of dividends. Investing involves risk including the risk of principal. Investments cannot be made directly in an index. This does not represent the performance of any AWM portfolio and past performance of the index is no guarantee of future results.