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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.
Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
Although the bulk of his net worth is invested in index funds, his favorite place to invest in individual stocks is M1 Finance, a site that allows you to build a custom portfolio of stocks for free.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
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