Is it always safe to invest in the S&P 500?
The S&P 500 Index is made up of the 500 largest companies that are profitable and publicly traded and domiciled in the United States. Companies like Home Depot, Apple, and Walmart are all included in the S&P 500. So, how safe is it to invest in this index? Safety is based on the amount of time that you keep your investment within the index. It really depends on how long you’re planning to remain invested. The shorter the time frame, the greater the chance that you may lose value. The longer the time frame the smaller the chance that you would lose value.
After your first year invested in the S&P 500, there’s a 27% chance that you may have experienced a loss of value. However, if you remain invested for at least 3 years your chance of losing value decreases to 16%. In other words, you have an 84% chance of having a higher valuation at the end of three years. At the same time, if you stay invested for a 7-year period, your chance of having a higher valuation goes up to 91%. Furthermore, by the time you remain invested for 14 years, you have a 0% chance of losing money. This means that there’s never been a period of 14 years in length where an investor has lost money if they remain continuously invested in the S&P 500. Consequently, the margin of safety of your investment in the S&P 500 is based on the length of time that you’re invested in it. The longer you keep your investment, the greater is your margin of safety.
Have more questions? Contact Us
Brad Lyons, CFP®
Investment Manager, Wiser Wealth Management
Click here to schedule a consultation with one of our financial planners.
Listen to Our Podcast:
Recent posts
Share This Story, Choose Your Platform!
Wiser Wealth Management, Inc (“Wiser Wealth”) is a registered investment advisor with the U.S. Securities and Exchange Commission (SEC). As a registered investment advisor, Wiser Wealth and its employees are subject to various rules, filings, and requirements. You can visit the SEC’s website here to obtain further information on our firm or investment advisor’s registration.
Wiser Wealth’s website provides general information regarding our business along with access to additional investment related information, various financial calculators, and external / third party links. Material presented on this website is believed to be from reliable sources and is meant for informational purposes only. Wiser Wealth does not endorse or accept responsibility for the content of any third-party website and is not affiliated with any third-party website or social media page. Wiser Wealth does not expressly or implicitly adopt or endorse any of the expressions, opinions or content posted by third party websites or on social media pages. While Wiser Wealth uses reasonable efforts to obtain information from sources it believes to be reliable, we make no representation that the information or opinions contained in our publications are accurate, reliable, or complete.
To the extent that you utilize any financial calculators or links in our website, you acknowledge and understand that the information provided to you should not be construed as personal investment advice from Wiser Wealth or any of its investment professionals. Advice provided by Wiser Wealth is given only within the context of our contractual agreement with the client. Wiser Wealth does not offer legal, accounting or tax advice. Consult your own attorney, accountant, and other professionals for these services.