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Investors: History Has Good and Bad News About the Stock Market Right Now | The Motley Fool

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  Published in Stocks and Investing on Tuesday, September 30th 2025 at 4:49 GMT by The Motley Fool
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Investors’ History: Good and Bad Lessons for the Modern Portfolio
(A concise synthesis of the Motley Fool article published September 30, 2025)

The Motley Fool’s September 30, 2025 feature – “Investors’ history has good and bad news about the” – examines the long‑term performance of the stock market and distills two key take‑aways for today’s investors: the market’s historic resilience and the frequency of its painful downturns. Drawing on data that stretches back over a century, the piece argues that while equities have consistently delivered superior returns, the path to those gains is paved with volatility that can trip up even the most seasoned investors.

1. The Historical Context: 1913‑2025

The article opens with a clear, data‑driven overview of the S&P 500’s performance from its inception in 1913 through the latest available year. Key statistics include:

The article underscores that, over the long haul, the S&P 500 outpaced U.S. Treasury bonds (averaging ~4–5% nominal and ~3–3.5% real). In 1920‑2020, the equity‑to‑bond ratio stood at roughly 2.5:1. This historic advantage is the “good news” the article points out.

2. The “Good” Side of History

2.1. Long‑Term Growth Outpaces Inflation

Despite the market’s periodic crashes, the article stresses that a disciplined, long‑term approach has historically compensated for short‑term pain. Over 30‑year horizons, the S&P 500 delivered returns that consistently outpaced inflation, delivering real gains of 7–9% per year on average. For those who stayed invested, the market’s “compounding engine” outstripped the erosion of purchasing power.

2.2. Consistent Outperformance of Bonds

Even during the 2008 crisis, when Treasury yields spiked, the S&P 500 still managed a 13% rebound in 2009. Bonds, by contrast, returned a meager 1–2% after accounting for inflation. That asymmetry provides a clear case for an equity‑heavy allocation in most growth‑seeking portfolios.

2.3. The Power of Dollar‑Cost Averaging

The article highlights studies showing that dollar‑cost averaging (DCA) – investing a fixed amount regularly – reduces the impact of market timing and mitigates risk. It quotes a Motley Fool study that found DCA investors outperformed 90% of market‑timers over multi‑decadal periods.

3. The “Bad” Side of History

3.1. Frequency of Sharp Drawdowns

While equity returns look attractive in aggregate, the article reminds readers that the market can fall by as much as 50% from peak to trough on more than a dozen occasions. The most recent large drawdown was the 2022–2023 decline of roughly 20% in the S&P 500 after a rally that began in 2020. The article warns that such swings can erode the compounding advantage if an investor is forced to sell at a low.

3.2. The Cost of Market Timing

A key point is the “time in the market versus timing the market” dichotomy. The article uses data to demonstrate that investors who try to time the market (e.g., selling before a crash) often end up buying back at higher prices and miss the subsequent recovery. The 2020 pandemic rally is used as a case study: those who sold pre‑Feb 2020 and did not reinvest during the sharp rebound missed an average of 10–12% of potential gains.

3.3. Volatility and Risk of Portfolio Concentration

Another “bad news” warning is the heightened risk of concentrated equity positions. While a single‑stock investment can yield spectacular gains, it also exposes investors to company‑specific shocks. Historical episodes like the 2000 tech bubble burst illustrate the perils of overexposure to a single sector.

4. Practical Take‑aways for the 2025 Investor

The article synthesizes the historical data into actionable advice:

1. Maintain a Diversified Asset Allocation – Blend equities, bonds, and alternative assets to smooth volatility. The article references the 2013‑2023 “Risk‑Adjusted Sharpe Ratio” as a tool for setting target allocations.

2. Stay the Course with DCA – Regular, systematic investing reduces emotional decisions and leverages market dips.

3. Avoid Timing the Market – Use a “buy‑and‑hold” strategy and only rebalance on schedule (e.g., annually) rather than reacting to short‑term news.

4. Plan for Inflation and Rising Bond Yields – With 2025’s inflation hovering at 4.5% and bond yields in the 4–5% range, the article advises keeping a portion of the portfolio in high‑quality corporate bonds or Treasury Inflation‑Protected Securities (TIPS) to protect purchasing power.

5. Be Prepared for Another Crash – While history shows that markets recover, the article cautions that a 30% crash can still wipe out 5–6% of an investor’s portfolio in a single year if not diversified.

5. Linking Back to Further Resources

The article embeds several links to deepen the reader’s understanding:

• “What Happens During a Market Crash?” – An explanatory piece on behavioral biases that amplify selling pressure.
• “Why Bonds are Not a Safe‑haven” – A look at the limits of fixed income in a high‑yield environment.
• “Building a Resilient Portfolio” – A guide on how to structure a diversified portfolio that can withstand market cycles.

These links are intended to provide context for the statistical claims made and offer practical guidance for implementing the outlined strategies.

6. Conclusion

In a nutshell, the Motley Fool article presents a balanced view: the historical record demonstrates that equities have delivered robust, inflation‑adjusted returns, but it also warns that market downturns are not anomalies – they are integral parts of the investment cycle. For the average investor, the lesson is clear: remain diversified, stick to a disciplined investing plan, and let the long‑term compounding win over the temptation to chase short‑term market swings. This approach, the article concludes, turns the “good and bad news” of history into a framework for steady, risk‑adjusted growth.