StateTrust investment advisors are always available to discuss time horizon issues related to a client’s investments and the volatility associated with the different asset classes over time.
Time can lower the risk and increase the returns on your investments. Stocks, for instance, have historically performed well over a longer period of time (20-year time horizon). If your portfolio contains a significant stock allocation, then it is best to have a long holding period (20 or more years), to ride out fluctuations in the market and diminishing the volatility associated with stocks in short holding periods.
The following graph shows the range of compound annual returns for stocks, government bonds, and treasury bills over one, five, and 20-year holding periods. This graph shows the risk of holding stocks diminishes with time and that in a 20 year holding period, stocks have never delivered a negative return.
Source: StateTrust’s analysis of Morningstar data. Performance shown is not indicative of the performance of any specific investment. An investor cannot invest in an index, such as the one these graphs are based on. Past returns are no guarantee of future performance. These returns are based on historical information, from sources believed to be reliable, but accuracy cannot be guaranteed, and these returns can vary in future time periods.
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