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Take 10-Year Average Returns with a Pile of Salt

November 26, 2018

When people look at investments, we can’t help but factor in past performance. In the disclaimers we’re expressly told not to do that. But it happens nonetheless.


But these performance numbers are simply snapshots in time. And for many investments, the 10-year average return snapshot is about to improve quite a bit.




In the near future, some of the worst results in modern stock market history will be erased from the 10-year average return numbers. I’m talking specifically about late 2008 and early 2009, especially from September 2008 to February 2009.


Those terrible times are beginning to come out of the 10-year averages now and will continue for the next several months, which will make 10-year averages look much better across the board.


Why point this out?


Because most investors don’t pay attention. But you know analysts and money managers do. And guess who will be basking gleefully in their 10-year performance numbers?


As of the end of September 2018, the historical average return on the S&P 500 was 10.2 percent, going back to 1926. The 10-year average ending on September 2018 was 12.6 percent.


Now let’s assume the S&P 500 in February 2019 is the same as it ended in September 2018. In other words, there’s a flat market for five months.


The 10-year average return on the S&P 500 in February 2019, assuming the market is flat until then, will be 17.1 percent!


I can already see analysts, portfolio managers, and the like, patting themselves on the back. And it’s all because some horrible results fell out of the calculation, not because performance improved, or risk decreased.


The lesson here is, if you avoid some really bad months, your return will improve significantly. That’s what my team and I are all about.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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