Market Returns = Out of Your Control. Your Savings Rate = In Your Control.

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If you invested $10,000 in the S&P 500 at the beginning of each year in the 1990s, you would have accumulated $280,019 by the end of 1999:


This was one of the best 10-year periods in U.S. stock market history.

Conversely, the following 10 years was one of the worst. A $10,000 annual investment in the S&P 500 at the beginning of each year from 2000 to 2009 would have left you with only $92,001 by the end of 2009:


And here’s how much a $10k yearly investment in the S&P 500 would have returned during each decade since 1930: 


If there’s one message this chart conveys, it’s that investment returns can fluctuate significantly from one decade to the next.

Unfortunately, as an investor, you don’t have control over how the stock market performs during a given decade.

What you do have control over is how much you choose to save and invest. 

Suppose you instead invested $15,000 each year:


Now during the 2000s you would have ended up with $138k instead of $92k.

And during the 1990s you would have ended up with $420k instead of $280k.

Through investing $15k each year instead of $10k, you could have systematically increased your total net worth by 50% no matter what decade you invested in:


And if you invested $20k per year, the results are even more dramatic:


These results aren’t earth-shattering. If person A invests $10k, person B invests $20k, and they both earn identical investment returns, person B will always end up with twice as much as person A.

Stock market performance in a given decade is largely out of your control.

Your savings rate in a given decade is largely within your control.

No matter how the stock market performs during the remainder of the 2010s, the 2020s, and beyond, you should focus on the variables you can control.

Grow your income.

Keep lifestyle inflation in check.

Minimize investment fees.

By doing so, you’ll have more money left over to invest, which will lead to a higher net worth despite what the stock market does over the coming decades.

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2 Replies to “Market Returns = Out of Your Control. Your Savings Rate = In Your Control.”

  1. I couldn’t agree with this more! I’ve been watching my net worth go up these last few years and recently realized that a good portion of my net worth is out of my control. Between my 401k and the value of my home going up I realized that none of it is something I can control. The biggest factor I can control is my savings rate so that has become my focus as of late. Don’t worry about all the other moving pieces. Focus on what you can control nearly 100% of the time.

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