I’ve had a few clients reach out to me over the past couple weeks (the last week of December 2024 & first week of 2025) with similar concerns:

“How and why did my account go down at the end of 2024?!”

The short answer: accounts are down because the market is down, and the market is down due to inflation and interest rate fears that were stoked by the December 17/18th Federal Reserve meeting.

But that’s not what I want to focus on today.

Instead, I want to focus on the true genesis of the question: these clients noticed a 1% to 2% drop in December, and that was cause for concern . For a $1MM account, that’s a $10,000 to $20,000 decrease. And I get it – the idea of “losing” $20,000 in a single month would furrow anyone’s brow!

I want to address that Stress today. Looking at investment returns over a single month – any single month – isn’t ideal. It’s a case of “missing the forest for the trees.” It’s too zoomed in. We need to zoom out!

I want to show you why.

Let’s Look at Some Numbers

Imagine someone who retired in 2003. They were 58 then, they’re 80 now. They’ve followed many simple Investing tenets described here on The Best Interest.

• They have a diversified portfolio of stocks and bonds.
• As with many prior examples from old articles, our retiree has a 60% stock, 40% bond portfolio.
• They retired with a healthy, but certainly not outlandish, $500,000 in their Retirement portfolio.
• They rebalance their account quarterly (about as high a frequency as I’d recommend).

I want to share some interesting data points about how their portfolio has performed over the past 22 years. Specifically, I want to zoom in on the monthly returns of that portfolio, since that’s how today’s Q&A got rolling in the first place.

But first, I want to assure you: this retiree has done quite well. Their portfolio has grown from $500,000 to $2.6 million.** As you look through the data points below, don’t forget about their success by staying the course.

**Since this article is focused on investment returns, I intentionally did not want to muddy the waters by including any distributions. I do recognize that any normal retiree would be distributing Money from their portfolio. But it simply distracts from today’s main point.

The first chart below shows our portfolio’s monthly performance, measured by percent change. I find it messy, random, and hard to get concrete takeaways.

So that’s why I created the second chart. It shows the same exact data, except ordered from best month to worst month over the ~22 years.

There are clearly more good months than bad months. But breaking it down further:

• The best month was +8.3%
• The worst month was down (-10.8%)
• The median month was up +1.0%
• The top 20% of months were each up more than +2.5%
• The worst 20% of months were down more than (-1.4%)

The last bullet is interesting. 20% of all months are worse than (-1.4%). This means that, 2-3 times per year (on average), you could expect a balanced portfolio to have a month on par with the negativity in December 2024 – that month wasn’t an outlier. It was perfectly normal!

But here’s the thing: most people do not think in percentages. They think about their portfolio in dollars. So let’s look at the same data as above, except measured in dollars instead of percentages.

First, here’s the “noisier” month-by-month data of the portfolio’s dollar changes. You’ll notice that recent years have been much more volatile, right? That’s the expected result of compound interest. As the account grows bigger, each percentage change leads to a larger dollar change. Or put another way: 1% of $2MM is more than 1% of $500,000.

• The best month was up $143,000
• The worst month was down (-$142,000)
• The median month was up $8840
• The top 20% of months were each up more than $28,000
• The worst 20% of months were each down more than (-$10,700)

Why share all this data?

Again, the point of this article is to arm you with facts. I want you to be a resilient investor. I want to steel you against the realistic facts of investing, especially investing in retirement. And to remind you to zoom out from the month-to-month, and instead focus on decades.

• Even in a well-balanced portfolio, there will be negative months.
• You will routinely see your account drop more than 1% in a single month.
• For many of you, those drops will create losses of $20,000. Or $40,000. Or $100,000 or more.

And if you only focus on those negatives, I can understand how scary that might sound.

But the opposite side of the coin is that you’ll see many more positive months. Months of $20K, or $40K, or $100K in gains.

If you stay the course, those long-term benefits await you.

Don’t zoom in on a single month of pain. Zoom out on the bigger picture.

Thank you for reading! If you enjoyed this article, join 8500+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week. You can read past newsletters before signing up.

-Jesse

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Jesse Cramer Writer & Financial Planner

Jesse Cramer is the writer of The Best Interest blog, the voice behind The Best Interest Podcast, and works full-time as a fiduciary financial planner for Cobblestone Capital Advisors in Rochester, NY.