There’s not much to be certain about in life, and in many ways that includes the stock market today. Still, there are a few guarantees that the stock market offers. Be sure you’re aware of them before investing in it, lest your performance suffer.
One thing that you’ll find in the stock market today has always been there: volatility. On any particular day, the market can soar or swoon. A glance at the Dow Jones Industrial Average‘s biggest one-day gains and losses confirms this: On each of two different days in October 2008, the Dow surged more than 10%. On each of eight different days in late 2008, the Dow gave back more than 5%. 2008 was a particularly volatile year, but big moves can happen any time. In 2011, the Dow gained more than 4% in a single day, and lost more than 4% on another. Those were moves of roughly 500 points.
It’s not just the overall stock market today that’s volatile: Individual stocks can be even more zigzaggy. Consider audio-chip maker Cirrus Logic, Inc. (NASDAQ:CRUS), which supplies many of Apple Inc. (NASDAQ:AAPL)‘s iDevices. Between April 16 and April 18 of this year, the stock tanked by more than 17%, and it lost about 20% on May 23. Why? Well, about 90% of its revenue is tied to Apple Inc. (NASDAQ:AAPL), and Apple Inc. (NASDAQ:AAPL)’s position in the stock market today isn’t what it used to be, with Steve Jobs gone, growth slowing, and margins being pressured. In mid-April, Cirrus warned of disappointing upcoming results, and got punished for that. In May, management cited profit-margin pressures of its own, along with competition and a maturing smartphone environment.
If you’re not prepared for volatility, you might get out of a solid stock or the overall market prematurely, not giving it a chance to recover and perform well.
Meanwhile, the stock market today also offers guaranteed uncertainty when it comes to the kind of growth you can expect. Parking your money in the S&P 500 index of 500 leading American companies for a decade might seem like a great way to enjoy some ups and downs and come out ahead overall — and there’s a good chance that that will happen. But still… check out these 10-year results, per data from S&P Dow Jones Indices:
|Decade ending in||Total return|
Clearly, even over a decade, results can be extremely varied. You might double or triple your money, see it not grow much, or see it fall by a significant amount. On the plus side, though, you’re much more likely to experience growth over a decade than you are a loss.