During buoyant market times, it may be easy to forget that advances in the equity markets often do not happen at a constant rate.
The chart to the right shows the annual returns of the S&P/TSX Composite Index over the past 40 years. It’s worth pointing out how the distribution of returns has significantly varied over this period. In fact, only 20 percent of annual returns fall within the long-term average return of 6.3 percent over the past four decades.
Most of us are longer-term investors and will invest over multiple market cycles. While we should enjoy the market’s advances, we shouldn’t forget that patience, through time in the markets, is often key in helping to provide predictability in investment returns over time.
Annual Returns of S&P/TSX Composite Index, 1981 to 2020