History, Volatility, and the Key to Successful Investing

Recently, I ran across a good article on Investopedia titled "Portfolio Returns: What is Reasonable to Expect?"  It addresses historical returns of the S&P 500, volatility, and staying to course as an investor.

Here is my quick take on the article:

As an investor, you must learn to stay the course during periods of market volatility. By researching history and embracing volatility, investors are able to stay to course and know that such market events occur regularly over time but don't last all that long.

Knowing enough not to panic when markets drop ~10% or so every few years is one fundamental aspect of personal investing success. And understanding that the power of compounding (the rule of 72) can help you accumulate lots of assets down the road is also a fundamental aspect of long-term oriented successful individual investing.

Regarding market timing, here is a great excerpt from the article:

"Over the 20 years from 1996-2015, an investor that stayed fully invested in an S&P 500 index with zero changes to their portfolio would have enjoyed a 6.44% annualized return. To put that in investment terms, a $100,000 investment would have grown to $348,347 over this 20-year span. By missing just the 10 best performing days of the S&P 500 during this same time period would have diminished your annualized return to 2.81% annually and left you with $173,979 in that same initial $100,000 investment. This is the powerful effect that poor market timing can have on your nest egg."

Here is a link to the article: Portfolio Returns: What's Reasonable to Expect?