What Are The Odds Or Likelihood Of Losing Money In The Stock Market Long-Term? (Facts, Statistics Analysis)
The majority of investors think long-term. For instance, most US households, excluding the wealthiest 1%, predominantly keep their stocks, bonds, and bills in retirement portfolios. In fact, those not in the top 1% or even 10% of wealth distribution have 60% and 77% of their investments, respectively, in defined contribution and defined benefit plans. Considering that many prioritize the future, the long-term performance of major assets is of utmost significance. What are the odds or likelihood of losing money in the stock market long-term?
Based on recent research, studies conclude that an international stock portfolio has a likelihood of losing money between 4.2 and 25.9%, depending on the time frame.
We would argue this is significantly higher than most investors would guess. After all, isn’t long-term investing a “sure thing”?
Let’s dig deeper into some very interesting research we found:
Long-Horizon Losses in Stocks, Bonds, and Bills
In August 2023, a study by Aizhan Anarkulova, Scott Cederburg, and Micheal O’Doherty was published with some fascinating findings. The study is called Long Horizon Losses In Stocks, Bonds, And Bills.
The study assessed the combined long-term return distributions in developed nations for domestic stocks, international stocks, bonds, and bills. These distributions consider both the historical and cross-sectional variations in returns across asset classes.
Special concentration was made on the likelihood and potential impact of enduring losses, considering their significant implications for long-term investors, pensioners, and savers.
One challenge when examining long timeframes is the limited effective sample sizes. To address this, an extensive dataset was utilized that covered approximately 2,500 years across 38 developed countries, spanning from 1890 to 2019.
Potential biases such as survivor bias and easy data bias, which can arise from focusing on final market results o