Research summary

Four timeless principles for investing success

November 30, 2023

Chart shows the changing proportions of savings and investment returns in contributing to an investment goal over time. The y-axis of the chart is labeled “Portion of contribution to investment goal,” with “0%” on the bottom and “100%” on the top. The x-axis is labeled “Goal horizon (years)” and runs from zero on the left to “40” on the right, with “2,” “10,” and “30” called out in between. A general arc is shown in the chart, running from the bottom of the lower left side to a little above the midpoint of the right side (at roughly 65%). Pale blue and teal define this arc, with pale blue representing savings and teal representing investment returns. The chart shows that as the goal horizon increases, the contribution to the goal amount from savings diminishes and the contribution to the goal from investment returns increases. Three sets of data are called out along the arc, for the 2-, 10-, and 30-year points along the x-axis, showing the proportion of savings and investment returns at each point. At two years, the contribution proportions are 94% savings, 6% investment returns; at 10 years, they are 80% savings, 20% investment returns; at 30 years, they are 51% savings, 49% investment returns.
Line chart shows the importance of maintaining discipline during volatile market events, using the Covid-19 market drawdown of 2020 as a case study. The y-axis represents the portfolio return, running from –10% on the bottom to 50% on the top. The x-axis represents time, running from January 2018 through October 2022. A single teal line plots the returns for a 60/40 stock/bond portfolio from the start of the period to March 2020, at which point the single line diverges into two lines for the rest of the period: A teal line that plots the post-March 2020 portfolio returns where the investor kept the 60/40 allocation, and a brown line that plots post-March 2020 portfolio returns where the investor fled to cash from March 18, 2020 through July 28, 2020. The brown line is markedly lower than the teal line. Three pieces of callout text are shown. On the upper left, one piece of text runs next to an arrow pointing to where the line diverges; it reads “COVID downturn: What if investors moved to 100% cash from the bottom of the market in March 2020 until the recovery in July 2020?” To the right, callout text summarizes the ending portfolio return for each of the two paths. The top callout reads “21% return for investors who kept 60%/40% stock/bond allocation.” The bottom callout reads “–2% return for investors who fled to cash from March 18, 2020, through July 28, 2020.”
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