Investment Updates
Here What To Know To Invest Wisely
Published Friday, January 13, 2023 at: 7:07 PM EST
With the bear market turning eight months old on Friday, and stocks 16.6% lower than their previous all-time high on January 3, 2022, it’s wise to remember that putting up with stock volatility has been well worth the risk over the past two decades.
The equity risk premium illustrated here shows the reward received annually for tolerating the risk of owning stocks versus owning a risk-free investment. Stocks, as measured by the Standard & Poor’s 500, averaged a 9.8% annual return in the 20 years — more than seven times the 1.2% annualized return on risk-free 90-day U.S Treasury bills. Subtracting the average annual return on T-bills from the return on stocks, the resulting 8.6% is the premium paid annually for taking the risk of owning U.S. stocks over the past 20 years.
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