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Keep Your Time Horizon in Perspective

Posted: Jonathan Chapman

During periods of volatility, keep your time horizon in mind. Over short periods of time, many asset classes can experience a wide range of returns. However, over longer periods of time, they will typically have a more narrow range of returns. In the chart below, you’ll see that Large Cap Stocks have experienced a pretty significant range of returns (down 43% to up 61%) over one-year periods since 1950. However, over 5, 10, and 20 year periods, you can see the range of returns over time narrows significantly. The same has been true for bonds as well as a diversified portfolio (60/40).

Therefore, when volatility spikes like it has over the last 2 weeks, remain calm and keep your time horizon in perspective.

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