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These are the monthly returns in the S&P 500 for the year so far:

  • January -5.2%
  • February -3.0%
  • Walk + 3.7%
  • April -8.7%
  • mayo + 0.2%
  • June -8.3%
  • July + 9.2%

It has already been 3 months this year when the market fell by 5% or more.

It didn’t happen once in the last year. It only happened twice in 20201. There was no decline of 5% or worse in all of 2017, 2016, 2014 or 2013.

A drop of 5% doesn’t happen often, but it’s not entirely out of the ordinary. Over the past 96 years, the stock market has fallen 5% or worse in a month, about once a year.

The last time we saw this month-to-month volatility was in 2008, when the market fell more than 5% in 5 different months.2

Monthly gains of about 4% and more than 9% this year have also been achieved. This is normal during a market downturn. Volatility tends to gather during downtrends.

For example, during the 2010 European debt crisis, the S&P 500 saw monthly losses of -3.6%, -8.0%, -5.2% and -4.5%. But there were also monthly gains of +3.1%, +6.0%, +7.0%, +8.9% +3.8%.

2020 saw monthly losses of -8.2%, -12.4%, -3.8% and -2.7%. But these losses were mixed with monthly gains of +12.8%, +4.8%, +2.0%, +5.6% +7.2%, +11.0% and +3.8%.

The craziest year for monthly returns I could find has to be 1932:

  • January -2.7%
  • February + 5.7%
  • Walk -11.6%
  • April -20.0%
  • mayo -22.0%
  • June -0.2%
  • July + 38.2%
  • August + 38.7%
  • September -3.5%
  • October -13.5%
  • November -4.2%
  • Dec + 5.7%

That’s half of your total monthly returns in a double-digit area. From March to June, the exchange lost 45% of its value.3 Then in July and August alone, the market was up 92%.

Can you imagine living through this kind of fluctuation today? Heads are going to explode all over CNBC.

Back in 1926, the S&P 500 was positive in nearly 63% of all months, which means it’s negative in 37% of monthly returns.

This is not a bad win rate but still leaves plenty of room for losses.

The price to enter Disney World is long lines, crowds of people, sore feet from all the walking, poor food, and exorbitant ticket prices that defy inflation laws every year.

The trade-off between all of these is to create great memories with your family, some good Epcot beer, a handful of good roller coasters, ear-to-ear smiles for your kids and a family photo or 12 you can look at fondly for years to come.

The price to enter the stock market is an overwhelming fluctuation, a yield stream lumpy with the pain and anguish that comes when you see a large portion of your savings evaporate before your eyes.

The trade-off between all of these things is long-term returns above the rate of inflation, which can earn you multiples of your initial investment and the greatest wealth building machine ever created.

You don’t get this:

…without trying this:

This is the nature of the beast.

In-depth reading:
The best and worst years in the history of the stock market

1Although those lower months had losses of -8.2% and -12.4% in February and March of that year.

2These monthly losses were -6.0%, -8.4%, -8.9%, -16.8%, -7.2%. A monthly loss of -3.3% was also a good measure. What a tough year.

3And that’s after stocks have already fallen more than 70% from highs.

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