The Vanguard S&P 500 ETF, or VOO, could deliver a 5% annual loss or a 21% gain over the next decade, based on historical data. The stock market, as tracked by the S&P 500, experienced one of its lowest 10-year returns with a total loss of 40% ending in the summer of 1939. Conversely, it also achieved a 600% return during another ten-year period near the end of the 1950s.
Ben Carlson, a stock researcher, analyzed the S&P 500's 10-year rolling returns from 1926 to 2023. During the 1939 period, the worst 10-year return averaged nearly 5% annually in losses. Other than that, no other 10-year period in this time frame ended with a loss, even with major events like wars, recessions, and financial scandals occurring.
Although the market has seen sharp drops every few years, it has historically bounced back. Over time, the S&P 500 has seen average annual returns of nearly 10%. Nevertheless, there remains the possibility of a sharp decline in the near future that could last for years. Investors holding VOO need to be prepared to ride out the downturns. The fund continues to be a straightforward and low-cost option for tracking the S&P 500.
This historical trend suggests that while short-term uncertainty remains, the long-term trajectory is generally upward. For investors with a long-term mindset, staying invested through all market conditions appears to be a sound strategy.
The 1930s and the 2000s were particularly difficult decades for investors, with the market delivering negative returns over 10-year periods. However, even these extreme events have not changed the overall upward trend. Every other 10-year window in history recorded gains, demonstrating the market's resilience in the face of adversity. This resilience is one reason VOO and similar funds remain popular among long-term investors.
For those considering where to invest $1,000 right now, it's important to understand the risks and potential rewards. While VOO offers simplicity and low fees, it's not without its challenges. The market's unpredictable nature means that even well-planned investments can be affected by sudden downturns. However, history shows that these downturns are often followed by significant recoveries. Investors must be patient and remain committed to their long-term goals.
The key takeaway is that while no one can predict the market's short-term performance, history supports the idea that long-term gains are likely. By investing in broad-market index funds like VOO, investors can benefit from the market's overall upward trend. This approach may not offer the high returns of individual stock picking, but it reduces risk and ensures consistent growth over time.