Volatility

Being realistic about investment performance will help you stay on track.

In an ideal world, would you prefer your investments to perform worse than expected, as expected, or better than expected?

I suspect, for both the short and the long term, you’d prefer them to do better than expected.

Since 1926, if you invested in the S&P 500 for any 16 year rolling time frame, you experienced a positive return 100% of the time. For all 10 year rolling time frames since 1926, you experienced positive returns 94% of the time. This shows that, historically speaking, if you invest for long enough the possibility of permanent loss is ZERO, AKA zero risk. 

Markets crash all the time. You should, at minimum, expect stocks to fall at least 10% once a year, 20% once every few years, 30% or more once or twice a decade, and 50% or more once or twice during your lifetime. Those who don't understand this will eventually learn it the hard way.

Someone emailed me last week asking why this is: