The Value of a Long-Term Perspective | American Funds

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The Value of a Long-Term Perspective

Worrying about investment results on a daily, quarterly or even yearly basis can distract investors from pursuing their long-term goals.

The market can change quickly and throw investors off balance. Declines are especially disturbing for those who are concerned with short-term fluctuations and watch the daily returns during volatile periods. During such periods, it can be helpful to step back and perhaps adjust your perspective.

For example, a look at the stock market over the past 30 years through December 31, 2016, shows quarterly gains — and losses — of as much as 23%. However, a hypothetical investor who entered the market with $1,000 and stayed the course would have seen an average annual return of 10.16%, and an ending value of $18,226.

Both charts below show what happened to the Standard & Poor’s 500 Composite Index over the past 30 years.

A Matter of Perspective

Focusing on short-term results could make many investors nervous:

Quarterly Returns of the S&P 500 (1987-2016)

CE_ICS_Q1_2016_Web_Article_ip3.9 Q Returns

Source: Standard & Poor’s

A long-term perspective shows how an investment would have grown over that same period:

Growth of a $1,000 Investment in S&P 500 (1987-2016)

CE_ICS_Q1_2016_Web_Article_ip3.9 1000Growth

Source: Standard & Poor’s

Looking at short-term results can be uncomfortable and frustrating, with the constant ups and downs. Focusing on long-term results can make those relatively brief jolts more tolerable. It may be easier to stay the course if you maintain a long-term perspective.

The S&P 500 Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2017 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.


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Terms and Definitions
A market capitalization-weighted index based on the results of approximately 500 widely held common stocks.