The stock market is the best place to invest for the long term — generating annual returns of around 10% over 20- or 30-year periods. Unfortunately, those returns are far from consistent in the short term.
So how inconsistent are they?
To answer that, let’s look at the annual gains for the S&P 500 over the last 30 years (1995–2024). This period is particularly interesting because it includes:
two massive bull markets
two devastating bear markets
The chart above shows the annual returns for each of those 30 years. (Returns exclude dividends.) Over the entire period, the average annual return was roughly 10%.
Consistently inconsistent, right? Few individual years land anywhere near that average.
The "experts" tell us that the stock market is rational - that it is continuously repricing based on the most current and complete information. They also suggest that the market is forward looking and focused on the long-term future. The data suggests that the opposite is true.
Sorting the yearly returns from best to worst provides additional insights.
20 of the 30 years delivered gains of 10% or more.
5 of the 30 years delivered losses of 10% or more.
This is the reality of stock market investing:
Most of the time—about two out of every three years—the market posts sizeable gains.
A small percentage of the time—roughly one out of every six years—investors endure large losses.
The remaining years deliver modest or flat results.
Stock market gains should not be this inconsistent. After all, the underlying businesses are far more predictable. The companies in the S&P 500 typically grow profits by 8% to 9% per year, with only rare down years where profits fall by 15% to 20%. Sales and profit growth are usually steady.
It’s not business results that create wild market swings—it's human emotion.Investors repeatedly overreact to both good news and bad news. Excessive pessimism (fear) drives stock prices far below fair value, while excessive optimism (greed) pushes them into the stratosphere. As long as humans make investment decisions, volatility will remain the norm.
Of course, this volatility makes investing uncomfortable. We all love the 20% up years, but those 25% down years are painful.
The investment industry’s traditional solution is simple: buy and hold. Ride the market up, and hold on for dear life on the way down. They often suggest adding low-yield bonds for “protection,” even though bonds offer meager 3% returns—and, as we saw in 2022, bonds can lose money too.
If you’re satisfied with annual returns of 7% or less, then the standard advice works fine.
But I wasn’t satisfied with “buy and hold.” Watching my stocks drop 40% in a few months seemed dumb. And I’ve never liked bonds—weak returns and real downside risk.
So instead, I decided to embrace market volatility.The stock market cycles through well-defined patterns. Using the same investment approach in every cycle never made sense to me.
I built a data-driven model that identifies these market cycles and adjusts the investment strategy accordingly—investing aggressively (100% in stocks) during growth cycles and moving out of stocks during downturns.
The result: You can capture big gains and avoid big losses.
Below is the distribution of annual gains from my system over the same 30-year period. Losses still occur—no system can eliminate them—but they can be significantly reduced, and without sacrificing strong returns in the up years.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Updated: 6 days ago
People at or near retirement age face a classic investing dilemma. You need strong investment returns to ensure you don’t run out of money in retirement. But you also can’t afford to suffer large losses in a stock market collapse.
The investment industry has long told us that you can’t have both—growth and safety.
We’re told that high returns come from aggressive growth funds, often concentrated in the technology sector. Many of these funds can generate annual gains close to 15%. The catch, however, is that they’re extremely volatile—capable of losing 30% or more in down markets. That’s true. Aggressive growth investments come with the risk of significant short-term losses.
For retirees, that kind of volatility can devastate a retirement plan.
We’re also taught that bonds are “safe” investments. But bond returns are much lower than stock returns, and bonds can lose money too. On average, bonds lose less in bear markets but earn far less in growth markets—typically 3% to 4% per year compared to about 10% for stocks.
It can seem like a no-win situation. Growth helps your retirement income, but it comes with high risk. Bonds feel safer but limit your income potential.
Investment professionals generally create a balance of stocks and bonds based on your age and risk tolerance. For older investors, they tend to favor conservative allocations, reasoning that the risk of a major loss early in retirement outweighs the benefit of higher returns.
The result? Many retirees end up with portfolios that produce mediocre returns (5%–6% per year) yet can still lose 25%–30% in a market meltdown. That’s the worst of both worlds.
Is that really all the trillion-dollar investment industry has to offer? Keep in mind, they charge high fees for these “solutions.”
I wasn’t willing to accept that reality. I never planned to get into the investment business—I was forced to. Necessity truly was the mother of invention in my case.
The stock market produces excellent long-term returns about 85% of the time—typically 15% to 20% per year. But the other 15% of the time, it loses money at a rate of roughly 37% per year.
I believed that if I could find a way to capture most of the upside during growth periods and avoid most of the losses during downturns, I could achieve higher returns with protection and safety.
I discovered that many others had tried to solve this problem, and some achieved decent results. But I found major flaws in their methods. Most relied on traditional stock market statistics—such as 200-day moving averages or indicators like MACD and RSI—that react too slowly in downturns and recoveries. While these approaches often perform better than the standard stock/bond mix, they’re still far from ideal.
So I set out to develop my own statistics and computer models. Fortunately, powerful analytical tools are readily available today.
Using hundreds of thousands of data points, and after about six months of work in 2019, I created my core investing system. It outperformed anything I’d seen for ordinary investors. Based on extensive backtesting, my system could outperform the S&P 500’s annual returns by 30% and reduce losses in market downturns by 60%.
I also knew that any successful system must remove emotion and guesswork. A disciplined, data-driven approach is essential. Predicting short-term market moves has always been impossible. Relying on emotion or intuition is not a recipe for success.
I came across a great investing quote recently: “Invest based on what you see, not what you think.”
I love how this quote succinctly sums up what works and what doesn't work in investing.
We’ve all seen the same talking heads continually—and incorrectly—predicting the next crash.
My objective then and now is simple: generate significant growth in retirement accounts while helping people sleep well at night. Having an automated, data-driven system that takes judgment and emotion out of the process is what investors truly need.
Knowing that you’re always properly invested—and that an automated system is protecting your life savings—leads to a terrific retirement. You get the financial freedom you deserve, without the stress of watching the market every day.
Despite what the investment industry tells you, you can have Growth AND Safety. Don’t settle for weak, conventional solutions. You deserve a better retirement.
You can now access my Growth & Safety fund directly from your brokerage account.
The chart below is from a standard brokerage account and shows a comparison of how the fund performed against the S&P 500 for the last three months.
In good times like this for the market, all we try to do is keep pace with the market. Where we win big is during bad times for the stock market - bear markets. We typically lose about 70% less during stock market collapses.
If you’d like to test out an investment in my Growth & Safety fund, click the link below to schedule a quick call. The minimum investment is only $5,000.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
As many of you already know, I like to take luck out of the equation when it comes to retirement investing. By using data and probabilities, you can generate better and more consistent investment results.
However, there is one aspect of retirement investing where luck plays a significant role — the timing of your retirement. The actual month and year you retire can have a major impact on your financial security throughout retirement.
This effect is driven by what’s known as Sequence of Returns Risk. You can control your savings habits and investment strategy, but you have no control over the performance of the stock market in the early years of your retirement.
Your investment returns during the first seven years of retirement have an outsized impact on your overall financial outcomes. Let’s look at an example.
If you retire at age 65 with an account balance of $1.5 million and live to age 90, you should be able to comfortably withdraw about $113,500 per year during retirement, assuming you earn a consistent 7.3% annual return. I use 7.3% because that’s the actual average annual return for the S&P 500 over the past 25 years (excluding dividends).
The problem is that returns are not consistent each year — especially if your portfolio is invested in the stock market.
The table below shows the actual annual returns of the S&P 500 from 2000 through 2024. The straight average of those 25 years was 7.3%. In the last column, I reordered the returns so that the best-performing years came first (2010–2024) and the worst-performing years came last (2000–2009).
YEAR | Actual Returns | Flat Returns | YEAR (Reordered) | Returns (Reordered) |
2000 | -10.1% | 7.3% | 2010 | 12.8% |
2001 | -13.0% | 7.3% | 2011 | 0.0% |
2002 | -23.4% | 7.3% | 2012 | 13.4% |
2003 | 26.4% | 7.3% | 2013 | 29.6% |
2004 | 9.0% | 7.3% | 2014 | 11.4% |
2005 | 3.0% | 7.3% | 2015 | -0.7% |
2006 | 13.6% | 7.3% | 2016 | 9.5% |
2007 | 3.5% | 7.3% | 2017 | 19.4% |
2008 | -38.5% | 7.3% | 2018 | -6.2% |
2009 | 23.5% | 7.3% | 2019 | 28.9% |
2010 | 12.8% | 7.3% | 2020 | 16.3% |
2011 | 0.0% | 7.3% | 2021 | 26.9% |
2012 | 13.4% | 7.3% | 2022 | -19.4% |
2013 | 29.6% | 7.3% | 2023 | 24.2% |
2014 | 11.4% | 7.3% | 2024 | 23.3% |
2015 | -0.7% | 7.3% | 2000 | -10.1% |
2016 | 9.5% | 7.3% | 2001 | -13.0% |
2017 | 19.4% | 7.3% | 2002 | -23.4% |
2018 | -6.2% | 7.3% | 2003 | 26.4% |
2019 | 28.9% | 7.3% | 2004 | 9.0% |
2020 | 16.3% | 7.3% | 2005 | 3.0% |
2021 | 26.9% | 7.3% | 2006 | 13.6% |
2022 | -19.4% | 7.3% | 2007 | 3.5% |
2023 | 24.2% | 7.3% | 2008 | -38.5% |
2024 | 23.3% | 7.3% | 2009 | 23.5% |
Average | 7.3% | 7.3% | Average | 7.3% |
Using the same $1.5 million starting balance and the same 7.3% average annual return, we get very different outcomes depending on the order of returns.
If you use the actual returns from 2000–2024, your sustainable annual retirement income drops by about 40%, to roughly $66,000 per year.
That’s a huge difference — a monthly income of $9,500 versus $5,500. This would dramatically affect your lifestyle in retirement.
This example might seem extreme, but it’s very real. Retiring in January 2000 would have been one of the worst times to retire in the past 60–70 years.
Here’s why the timing of your retirement matters so much: In your first seven years of retirement, your account balance is at its highest. Since you’re withdrawing money every year, your balance steadily declines over time. A 10% gain in your early years may add more than $120,000 annually, while a 10% gain in your final years might only add $30,000 to $40,000.
Now, if you retired in January 2010, you were very lucky. The 15 years from 2010 through 2024 were exceptionally strong for the stock market — the S&P 500 averaged over 13% per year before dividends.
To illustrate, if we reverse the sequence — using 2010–2024 returns first and 2000–2009 returns last — the average annual return remains the same, but the order flips. In this scenario, the best years come first, and the worst come later.
That change alone raises the annual retirement income to $141,500.
The range of possible outcomes is wide. With the same starting balance and average return, simply rearranging the order of good and bad years can result in income ranging from $66,000 to $141,000 per year.
That’s the power — and danger — of luck in retirement timing.
You can’t control short-term market volatility, but you can minimize its impact. Using my investment system, which limits losses during down years, the effect of unlucky timing is greatly reduced — though it can never be eliminated entirely.
Because we can’t predict or control the sequence of returns we’ll experience, I recommend a conservative approach: Withdraw no more than 80% of your maximum projected income during your first seven years of retirement. This simple step helps preserve your capital and provides a crucial buffer against early market declines.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
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