The Stock Market Hasn’t Always Earned 8%, 10%, or 12%

From the first time you started investing, even from the first time you even thought about investing, you were told to invest in the stock market because you’ll earn 8%, 10%, and even 12% per year. You were told the stock market has always provided these types of returns. You were told the risk you were taking by investing in the stock market was basically neutralized by the large returns you would receive. You were told the stock market was worth it. You were told don’t worry, if the stock market crashes your future huge rates of return will not only make up for all the losses, but will still provide you huge rates of return. You were told to ride out the market, hang in there, you’re in it for the long haul, don’t worry about volatility and losses. You were told the only way you can succeed financially is to take the risk, invest in the stock market, and get those huge rates of return.

All of this has to sound very familiar to you. Well, if all of this works out, and you earn 8%, 10%, or 12% every year, of course everything would turn up roses. But if you don’t get the 8%, 10%, or 12% returns you have been promised and/or hoped for, your current and future financial security could be in jeopardy. And the truth is, there is an extremely low probability, astronomically low, that you will earn 8%, 10%, or 12% year-after-year. And if you bank your future on something that has a very slim chance of happening, you probably aren’t going to have a very happy retirement.

Let’s Look At The S&P 500 Index Since 2000

The S&P 500 Index is made up of the largest 500 companies in the United States, and acts as a very broad base indicator for the stock market in general. The S&P 500 Index started at 1,469 in January of 2000 and ended at 2,506 in December 2018, a period of 19 years. At first blush, it looks like there was tremendous growth, from 1,469 all the way up to 2,506! But math tells us a different story. This is a just a 2.85% annual compounded increase, per year for 19 years, before fees.

How could this happen when the stock market has been in the longest bull market in history, with the market hitting all-time highs again and again? The unbelievably low 2.85% annual compounded increase was caused by two (2) large losses that occurred:

  • From 2000-2002, during the Technology Bubble, the S&P 500 Index lost approximately -50%. You then needed a +100% gain just to recover, not make any money, just get back to even.
  • By 2007 the market recovered and then lost -50% again in the 2008 Financial Crisis. And now you needed a second +100% gain to just recover for the second time.
  • What’s most hard to believe is from 2000-2013, the S&P 500 Index increased by 0%, starting in January 2000 at 1,469 and ending in January 2013 at 1,469. That is a 0% increase for 13 years!

If You’ve Accumulated Assets – You Are Not Really An Investor – You Are A Saver

When I tell people the information above about the stock market and the low actual annual increases that have occurred, many of them reply that they think my numbers look low, and they believe their accounts grew at significantly higher rates. They feel they made more money. You might feel the same way. So first, the numbers I provided are accurate and you can check it yourself. Secondly, the high growth rates you believed you have received were most likely just an optical illusion, like a magician fools us all when they are on stage. During the time period from 2000-2013, your accounts probably didn’t go up in value from high returns.

Your account values increased because you kept adding money to them month-after-month, year-after-year, decade-after-decade. You had more money in your accounts because you kept putting new money into your accounts. You kept contributing. You kept squirrelling it away, like a squirrel saving nuts for the winter, you kept saving money for retirement. You kept saving money, because saving is what you did to get here, it’s how you accumulated assets, you are a saver. And because you are a saver, not because you are an investor, because you are a saver, you now have a big pile of money. And as a saver, the one thing you never want to happen is to lose some of your savings, just like the squirrel doesn’t want to lose even one of his precious nuts, so you need to make sure your savings are positioned to be protected at all times from large losses.

Keep your money safe out there!










Our Disclosure

None of the material in this presentation is intended to give you specific tax, investment, real estate, legal, estate, retirement, or financial advice, but rather to serve as an educational platform to deliver information; nor is it intended to show you how the strategies presented can specifically apply to your own tax, investment, estate, financial, or retirement position, but rather to offer an idea of how these principles generally may apply. This data is furnished with the understanding that the authors and publishers are not engaged in rendering you legal, real estate, accounting, estate, investment, tax, financial, retirement, or other professional advice or services through this presentation.  None of the material in this presentation is intended as a solicitation for you to buy or sell any financial product.  Nothing is directly or indirectly guaranteed by this presentation.  A fixed index annuity with an income rider can protect your savings from losses and provide you guaranteed lifetime income, but you could incur surrender charges, gains aren’t guaranteed, you’ll pay a fee, and guarantees are backed by the financial strength and claims paying ability of the issuing annuity company. Any investment in stocks, bonds, or mutual funds can lose principal, even with a stop loss, and there are no guarantees of gains.  All investments involve risk and investment recommendations will not always be profitable.  The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund a new portfolio and/or annuity may have tax consequences, early withdrawal penalties, or other costs and penalties as a result of the sale or liquidation. You cannot invest directly into a stock market index.  Illustrations, projections, and hypothetical examples are used to explain concepts and are not indicative of potential results you could receive; past performance is no guarantee of future results; and results are not indicative of any particular investment or income tax situation; your results will be different and could be lower or higher.  Insurance product features and benefits, such as guaranteed lifetime income riders, are subject to contract terms, limitations, fees, and the claims paying ability of the insurance company issuing the contract.  Consult with a qualified investment, tax, legal, and/or retirement advisor before making any decisions.


Peak Financial Freedom Group – 2520 Douglas Boulevard, Suite 110, Roseville, CA 95661  (916) 791-7063

Investment Advisor Representative of and Advisory Services offered through Fiduciary Solutions, LLC, a Registered Investment Advisor. Peak Financial Freedom Group, LLC and Fiduciary Solutions, LLC are affiliated entities. Peak Financial Freedom Group provides no Advisory Services.  Insurance products and services provided by independent agents.  Jim Files CA Insurance License #0F06511 & Dan Ahmad CA Insurance License #0732913