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Is Historical S&P 500 Performance a Credible Teacher?

The past 15 years have given investors a gut wrenching, and at times, exhilarating ride on a stock market roller coaster.  The chart below tracks the S&P 500 Index price from March 3, 1999 through February 28, 2014.  Most of you are familiar with the chart, but I thought it might be a good time to put it out as a reminder that stock prices rise and fall on a regular basis.  The lofty highs of the 1990s tech bubble were followed by a 46% plunge with the Index falling from 1518 to 815 over 25 months.  It took 5 years to recover, topping out at 1549 on October 31, 2007.  The financial crisis set stocks rolling down hill, losing 55 percent before they hit bottom at 696, just sixteen months to wipe out the prior 5 year gain.  The bounce off the March 3, 2009 low started the rally that has continued for 5 years, with stocks rising 167% before closing at 1859 on Feb. 28, 2014.

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Historical S&P 500 Index Golden Hills Financial Group

Historical S&P 500 Index from Golden Hills Financial Group

Source S&P 500 Index price line: Morningstar Advisor. Boxed information is mine.

Could stock prices continue to rise?  Sure.  This chart is a picture of what has occurred over the past 15 years.  That is a short period of time in history.  It is simply a reminder that stocks have had a nice run since the low of 2009.  If you have been in the market, your portfolio likely has built up some gains.  Maybe this picture prods you to pull out your last investment statement to see if your allocation to stocks has become bloated. You may decide to rebalance your portfolio to capture some of those gains just in case history repeats itself.

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