Longer Horizons Look Better for Stocks

For many investors, it’s hard not to follow the daily fluctuations of the stock market. But day-to-day volatility is a reminder that stocks are best considered a long-term investment.

Part of the reason stocks have higher expected returns than bonds is uncertainty over shorter horizons. For example, the S&P 500 Index return was negative in about 24% of overlapping one-year periods from January 1926 through March 2025. The worst outcome over these one-year periods was about –68%, dropping $1 in invested capital to just $0.32.

Things have looked better over longer horizons, with the caveat that the number of independent observations among rolling return windows dwindles as the horizon lengthens—just five for the 20-year returns. But the frequency of negative returns decreases as the investment period expands, and no stretch over 184 months has been negative.