For anyone interested, I’ve been pinch hitting for Senior Analyst Brent Vondera and writing the Daily Insight the past few days.  You can see those posts and other content from Acropolis analysts by visiting our blog at www.acrinv.com/blog/.

It has been an extremely volatile few days, which makes it easy to let emotions take control of your investment decisions.  Emotions and investing are two things you don’t want to mix together.

If you find yourself struggling with the recent bout of volatility, take a step back and remember that investing is a long term game.  Victory (reaching your goals) is not determined in one week, month, or year.  The charts below are something I’ve shown before, but I find that it really helps keep your head in the game for the long run.

As you can see, stocks are very volatile over a one-year period, but are much smoother over longer periods of time.  Compared to the one-year returns, the three-year returns deviate less from the average return (which is 6.6% after inflation and represented by the red line), and the 10-year returns hardly deviate from the average at all.

Sure, there are 10-year periods where returns are less than the long-term average and even negative on some rare occasions, but the point is to not let these short term fluctuations trick you into making a poor investment decision.  Instead, the recent downdraft should be viewed as an opportunity to rebalance your portfolio and not as an obstacle to reaching your goals.

Peter Lazaroff

St. Louis, MO

Acropolis Investment Management