Chart: Stock Market Declines Are More Common Than You Think

If you invest in stocks, you know that they go up and down. Below is an S&P 500 histogram (source) showing the distribution of annual returns, which were negative 1/3rd of the time (and thus positive 2/3rd of the time). Not bad, you’ll take those odds, right?

But as the last part of 2018 showed us, returns aren’t all about January to December. There can be big swings in a single month or two which leave people stressed or even panicked. Dimensional Fund Advisors (DFA) had an article about the recent market volatility which included an interesting chart tracking the largest intra-year gains and losses (defined as peak to trough, and trough to peak).

Bottom line. Stock market declines are more common than you think. Since 1979, the average intra-year decline was about 14%! At the same time, 33 out of out 39 years managed to end up with a positive annual return when measured from January to December.