The Value of a Long-Term Perspective | Capital Group

Creating a Financial Plan

The Value of a Long-Term Perspective

Worrying about investment results on a daily, quarterly or even yearly basis can distract investors from pursuing their long-term goals.

The market can change quickly and throw investors off balance. Declines are especially disturbing for those who are concerned with short-term fluctuations and watch the daily returns during volatile periods. During such periods, it can be helpful to step back and perhaps adjust your perspective.

For example, a look at the stock market over the past 30 years through December 31, 2018, shows yearly gains — and losses — of as much as 22%. However, a hypothetical investor who entered the market with $1,000 and stayed the course would have seen an average annual return of 9.97%, and an ending value of $17,299.

Both charts below show what happened to the Standard & Poor’s 500 Composite Index over the past 30 years.

A Matter of Perspective

Focusing on short-term results could make many investors nervous:

Quarterly Returns of the S&P 500 (1988-2018)


Source: Standard & Poor’s

A long-term perspective shows how an investment would have grown over that same period:

Growth of a $1,000 Investment in S&P 500 (1988-2018)


Source: Standard & Poor’s

Looking at short-term results can be uncomfortable and frustrating, with the constant ups and downs. Focusing on long-term results can make those relatively brief jolts more tolerable. It may be easier to stay the course if you maintain a long-term perspective.

The S&P 500 Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2019 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Certain market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. 

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Terms and Definitions
S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.