Value of One Dollar 1925 - 1999

If it was possible to invest one dollar, $1.00, on January 1, 1925, in either the small cap stock index, large cap stock index, long term bonds, or short term bonds how much would it be worth? Obviously, it is not possible to invest just $1.00 and this is given to illustrate which investment gives the best long term growth. This data comes from the book titled Investments by Bodie, Kane, & Marcus.

Seventy five, 75, years later on December 31, 1999 here is how the numbers come out:

Due to inflation: $9.40 on December 31, 1999 is equal to $1.00 on January 1, 1925. This is needed to calibrate the results of these four investments.

Short term bonds beat inflation slightly and equals $15.41.

Long term bonds did better than short term bonds and equals $38.58.

The large cap stock index, S&P 500, had a value of $2,481.87

The small cap stock index, Russell 2000, had a value of $6,382.63.

A couple of points:

1. Saving just $1.00 when invested for the long term can make a difference.
2. Long terms investments get better growth with stocks than bonds.
3. Bonds do a better job of stability rather than growth.

Investing 2000 - 2006

What can we learn from Investing 2000 - 2006? The table below shows the performance of a small cap stock indes and a large cap stock index during the 7 year period of 2000 - 2006 as found using internet sources. This period had the tech bust, Soldiers in Iraq and Afghanistan, relatively normal inflation and interests rates. Did anyone make money during this period? What investment did the best?

If $1,000 was invested on January 1, 2000 here is how the numbers came out:
Small Cap Stocks = $1,546
Large Cap Stocks = $966

So far this decade Large Cap Stocks has the worst performance. Below is a table of the value of the $1,000 investment at the end of each year.

Year /Small Stocks /Large Stocks
2000 /958 /899
2001 /967/782
2002 /758 /599
2003 /1,102/758
2004 /1,291 /826
2005 /1,330 /850
2006 /1,546 /966

It will be interesting to see how these investments perform for the rest of the decade. The past suggests that large stocks will rise above the $1,000 value by the end of 2009. It is not possible to predict the future value of an investment and diversification can smooth out some risk.

Investing in the 90's

What can we learn from Investing in the 1990's? The table below shows the performance of small cap stocks, large cap stocks, long term bonds, and short term bonds during the 10 year period of 1990 - 1999, as found in book titled Investments by Bodie, Kane, and Marcus. This period had relatively normal inflation and interests rates. Did anyone make money during this period? What investment did the best?

If $1,000 was invested on January 1, 1990 here is how the numbers came out:

Small Cap Stocks = $3,654
Large Cap Stocks = $5,325
Long Term Bonds = $2,282
Short Term Bonds = $1,631

Stocks did very well in this decade. Large cap stocks came in first followed by small cap stocks. Long term bonds came in a distant third and short term bonds had the lowest return.

Below is a table of the value of the $1,000 investment at the end of each year.

Year /Small Stocks /Large Stocks /Long Bonds /Short Bonds
1990 /729 /968 /1,071 /1,079
1991 /1,096 /1,265 /1,268 /1,140
1992 /1,401 /1,362/1,367 /1,180
1993 /1,685/1,497 /1,579 /1,215
1994 /1,629 /1,516/1,465 /1,262
1995 /2,169 /2,088 /1,929 /1,333
1996 /2,527 /2,569 /1,914 /1,406
1997 /3,093 /3,422 /2,202 /1,481
1998 /3,014 /4,400 /2,500 /1,557
1999 /3,654 /5,325 /2,282 /1,631

OBSERVATIONS:

1. Stocks gave the best return
2. Stocks had the most volatility
3. Bonds did a better job of providing account balance stability
4. Stocks need to be held with a longer term perspective
5. You can not time the market
6. Stocks had more up years than down years
7. Long term bonds lost money 2 of the 10 years, so it is possible for a bond to lose money
8. Short term bonds never lost money in a year

Stocks had similar returns in the 1990's as the 1980's. The lower interest rates and lower inflation rates of the 80's gave better stock returns than during the 70's. It is important to know what you want your investments to do and act accordingly. It is not possible to predict the future value of an investment and diversification can smooth out some risk.

Investing in the 80's

What can we learn from Investing in the 1980's? Will the same trends in the 1940's, 1950's and 1960's return in the 1980's?

The table below shows the performance of small cap stocks, large cap stocks, long term bonds, and short term bonds during the 10 year period of 1980 - 1989, as found in the book titled Investments by Bodie, Kane, & Marcus. During this period, interest rates and commodity prices returned to more normal levels. Did anyone make money during this period? What investment did the best?

If $1,000 was invested on January 1, 1980 here is how the numbers came out:

Small Cap Stocks = $3,250
Large Cap Stocks = $5,059
Long Term Bonds = $2,971
Short Term Bonds = $2,368

With the interest rates dropping, the return for stocks and bonds did very well. Large cap stocks came in first with small cap stocks & long term bonds essentially equal. The lower inflation rate helped stocks.

Below is a table of the value of the $1,000 investment at the end of each year.

Year /Small Stocks /Large Stocks /Long Bonds /Short Bonds
1980 /1,353 /1,325 /1,132 /1,116
1981 /1,459 /1,259 /1,173 /1,282
1982 /1,859 /1,537 /1,249 /1,420
1983 /2,500/1,881 /1,242 /1,546
1984 /2,150 /2,002/1,432 /1,700
1985 /2,769 /2,643 /1,900 /1,834
1986 /2,863 /3,129 /2,356 /1,947
1987 /2,464 /3,296 /2,293 /2,054
1988 /2,999 /3,852 /2,486 /2,186
1989 /3,250 /5,059 /2,971 /2,368

OBSERVATIONS:

1. Stocks had much less volatility than the 70's
2. Bonds did a better job of providing account balance stability
3. Stocks need to be held with a longer term perspective
4. You can not time the market
5. Stocks had more up years than down years
6. Long term bonds lost money 2 of the 10 years, so it is possible for a bond to lose money
7. Short term bonds never lost money in a year

The trends of the 1940's , 1950's, & 1960's returned for stocks in the 1980's. The lower interest rates and lower inflation rates of the 80's gave better returns than during the 70's. Thankfully, we are not in a high interest rate and high inflation period.

It is important to know what you want your investments to do and act accordingly. It is not possible to predict the future value of an investment and diversification can smooth out some risk.

Investing in the 1970's

What can we learn from Investing in the 1970's? Will the same trends in the 1940's, 1950's and 1960's hold true in the 1970's?

The table below shows the performance of small cap stocks, large cap stocks, long term bonds, and short term bonds during the 10 year period of 1970 - 1979, as found in the book titled Investments by Bodie, Kane, & Marcus. This period includes high interest rates (20% interest rates on mortgages), high commodity prices ($2.00 gas and $800 gold) and stagflation. Today, the interest rate for mortgages are lower and commodity prices have rebounded with gold about $800. Did anyone make money during this period? What investment did the best?

If $1,000 was invested on January 1, 1970 here is how the numbers came out:

Small Cap Stocks = $2,314
Large Cap Stocks = $1,774
Long Term Bonds = $1,900
Short Term Bonds = $1,840

With the high interest rates, the return on bonds got much better. With the high inflation rate during this period the increases in bonds just kept up with inflation. Small cap stocks came in first with large cap stocks, long term bonds, and short term bonds essentially equal. The high inflation rate sure did change the trend from the 40's, 50's, and 60's.

Below is a table of the value of the $1,000 investment at the end of each year.

Year /Small Stocks /Large Stocks /Long Bonds /Short Bonds
1970 /835 /1,041 /1,127 /1,065
1971 /989 /1,189 /1,324 /1,111
1972 /982 /1,416 /1,397 /1,154
1973 /584/1,207 /1,417 /1,233
1974 /410 /888/1,495 /1,331
1975 /696 /1,219 /1,622 /1,408
1976 /1,077 /1,512 /1,802 /1,480
1977 /1,314 /1,402 /1,818 /1,555
1978 /1,607 /1,493 /1,742 /1,666
1979 /2,314 /1,774 /1,900 /1,840

OBSERVATIONS:

1. Stocks had a lot of volatility during this high inflation period
2. Bonds to a better job of providing account balance stability
3. High inflation is not good for stocks or bonds
4. Bonds had better returns with high inflation
5. Stocks need to be held with a longer term perspective
6. You can not time the market
7. Stocks had up and down years
8. Long term bonds lost money 1 of the 10 years, so it is possible for a bond to lose money
9. Short term bonds never lost money in a year
10. Small cap stocks had more volatility than large cap stocks

The trends of the 1940's , 1950's, & 1960's did not hold true in the 1970's. The high interest rates and high inflation rates sure did change the trends. Thankfully, we are not in a high interest rate and high inflation period. Investors in bonds had stability. It is important to know what you want your investments to do and act accordingly. It is not possible to predict the future value of an investment and diversification can smooth out some risk.

Investing in the 1960's

What can we learn from Investing in the 1960's? Will the same trends in the 1940's and 1950's hold true in the 1960's?

The table below shows the performance of small cap stocks, large cap stocks, long term bonds, and short term bonds during the 10 year period of 1960 - 1969, as found in the book titled Investments by Bodie, Kane, & Marcus. This period includes the Vietnam War and Hippies. Did anyone make money during this period? What investment did the best?

If $1,000 was invested on January 1, 1960 here is how the numbers came out:

Small Cap Stocks = $3,619
Large Cap Stocks = $2,128
Long Term Bonds = $1,120
Short Term Bonds = $1,464

For the 3rd decade in a row, stocks outperformed bonds by a large margin. Small cap stocks beat out large cap stocks by a narrow margin. Short term bonds was third. Long term bonds came in last and really did not grow very much, adding $120. Doesn't it seem ironic that during a period of great uncertainty that stocks would outperform bonds and grow this much.

Below is a table of the value of the $1,000 investment at the end of each year.

Year /Small Stocks /Large Stocks /Long Bonds /Short Bonds
1960 /948 /1,002 /1,138 /1,027
1961 /1,237 /1,279 /1,140 /1,048
1962 /1,034 /1,166 /1,218 /1,077
1963 /1,161/1,430 /1,212 /1,111
1964 /1,378 /1,669 /1,266 /1,150
1965 /1,897 /1,877 /1,263 /1,195
1966 /1,744 /1,685 /1,310 /1,252
1967 /3,547 /2,091 /1,213 /1,305
1968 /5,343 /2,321 /1,198 /1,374
1969 /3,619 /2,128 /1,120 /1,464

OBSERVATIONS

(Similar to the 1950's):

1. Stocks do a better job of providing investment growth
2. Bonds to a better job of providing account balance stability
3. Short term bonds outperformed long term bonds - unusual
4. Stocks need to be held with a longer term perspective
5. Stocks did well even in a period of uncertainty
6. You can not time the market
7. Stocks had up and down years
8. Long term bonds lost money 5 of the 10 years, so it is possible for a bond to lose money
9. Short term bonds never lost money in a year
10. Small cap stocks had more volatility than large cap stocks

The trends of the 1940's & 1950's mostly held true in the 1960's. Investors in stocks were rewarded long term while bond holders had stability and not as much growth. It is important to know what you want your investments to do and act accordingly. It is not possible to predict the future value of an investment and diversification can smooth out some risk.

Investing in the 1950's

What can we learn from Investing in the 1950's

The table below shows the performance of small cap stocks, large cap stocks, long term bonds, and short term bonds during the 10 year period of 1950 - 1959, as found in the book titled Investments by Bodie, Kane, & Marcus. This period includes the Korean War and baby boomers.

Did anyone make money during this period? What investment did the best?

If $1,000 was invested on January 1, 1950 here is how the numbers came out:
Small Cap Stocks = $5,697
Large Cap Stocks = $5,896
Long Term Bonds = $1,024
Short Term Bonds = $1,203

Stocks outperformed bonds by a large margin. Large cap stocks beat out small cap stocks by a narrow margin. Short term bonds was a distant third. Long term bonds came in last and really did not grow, adding $24. Doesn't it seem ironic that during a period of great uncertainty that stocks would outperform bonds and grow this much.

Below is a table of the value of the $1,000 investment at the end of each year.

Year /Small Stocks /Large Stocks /Long Bonds /Short Bonds
1950 /1,455 /1,327 /990 /1,012
1951 /1,592 /1,638 /971 /1,027
1952 /1,693 /1,948 /990 /1,044
1953 /1,597/1,914 /1,028 /1,063
1954 /2.637 /2,920 /1,078 /1,072
1955 /3,213 /3,838 /1,063 /1,089
1956 /3,335 /4,086 /1,008 /1,116
1957 /2,834 /3,630 /1,103 /1,151
1958 /4,836 /5,220 /1,062 /1,169
1959 /5,697 /5,896 /1,024 /1,203


OBSERVATIONS (Similar to the 1940's):

1. Stocks do a better job of providing investment growth
2. Bonds to a better job of providing account balance stability
3. Short term bonds outperformed long term bonds - unusual
4. Stocks need to be held with a longer term perspective
5. Stocks did well even in a period of uncertainty
6. You can not time the market
7. Stocks had up and down years
8. Long term bonds lost money 2 years, so it is possible for a bond to lose money
9. Short term bonds never lost money in a year
10. Small cap stocks had more volatility than large cap stocks

The trends of the 1940's mostly held true in the 1950's. Investors in stocks were rewarded long term while bond holders had stability and not much growth. It is important to know what you want your investments to do and act accordingly. It is not possible to predict the future value of an investment and diversification can smooth out some risk.

Investing in the 1940's

What can we learn from Investing in the 1940's

The table below shows the performance of small cap stocks, large cap stocks, long term bonds, and short term bonds during the 10 year period of 1940 - 1949, as found in the book titled Investments by Bodie, Kane, & Marcus. This period is best known for World War II, people at home rationing all resources, troops coming home, and people spending money once the war ended. Did anyone make money during this period? What investment did the best?

If $1,000 was invested on January 1, 1940 here is how the numbers came out:

Small Cap Stocks = $6,523
Large Cap Stocks = $2,392
Long Term Bonds = $1,423
Short Term Bonds = $1,038

Stocks outperformed bonds by a large margin. Small cap stocks really took off during the war and achieved the high for the decade in 1945. Large cap stocks came close to the high for the decade in 1945. Long term bonds was a distant third. Short term bonds came in last and really did not grow, adding $38. Doesn't it seem ironic that during a period of great uncertainty that stocks would outperform bonds and grow this much.

Below is a table of the value of the $1,000 investment at the end of each year.

Year /Small Stocks /Large Stocks /Long Bonds /Short Bonds
1940 /882 /904 /1,065 /1,000
1941 /767 /802 /1,076 /1,001
1942 /1,158 /969 /1,134 /1,003
1943 /2,313 /1,226 /1,189 /1,007
1944 /3,713 /1,483 /1,232 /1,006
1945 /6,766 /2,019 /1,316 /1,009
1946 /5,900 /1,832 /1,318 /1,013
1947 /5,717 /1,922 /1,302 /1,018
1948 /5,366 /2,023 /1,342 /1,026
1949 /6,523 /2,392 /1,423 /1,038

OBSERVATIONS:

1. Stocks do a better job of providing investment growth
2. Bonds to a better job of providing account balance stability
3. Short term bonds are not an investment
4. Stocks need to be held with a longer term perspective
5. Stocks did well even in a period of uncertainty
6. You can not time the market because if you would have waited to invest in stocks until the war was over you would not have made any money during the last half of the decade
7. Stocks had up and down years
8. Long term bonds lost money 1 year, so it is possible for a bond to lose money
9. Short term bonds never lost money in a year
10. Small cap stocks had more risk than large cap stocks as the low was lower and the high was higher

It is important to know what you want your investments to do and act accordingly. It is not possible to predict the future value of an investment and diversification can smooth out some risk.

Investing 1926 - 1939

The table below shows the performance of small cap stocks (Russell 2000), large cap stocks (S&P 500) , long term bonds, and short term bonds during the 14 year period of 1926 - 1939, as found in the book titled Investments by Bodie, Kane, & Marcus. I was not alive and from talking with people who were the Depression was a difficult time period. Did anyone make money during this period? What investment did the best?

If $1,000 was invested on January 1, 1926 here is how the numbers came out:

Small Cap Stocks = $1,735
Large Cap Stocks = $1,731
Long Term Bonds = $1,833
Short Term Bonds = $1,185

Long term bonds had the slight lead and grew by $833 to $1,833 with small cap and large cap stocks close behind. Short term bonds came in last and grew by $185 to $1,185.

Below is a table of the value of the $1,000 investment at the end of each year.

Year Small Stocks Large Stocks Long Term Bonds Short Term Bonds
1926 911 1,122 1,045 1,032
1927 1,204 1,526 1,130 1,064
1928 1,747 2,125 1,120 1,098
1929 859 1,963 1,169 1,150
1930 467 1,454 1,242 1,177
1931 237 792 1,176 1,189
1932 263 719 1,316 1,202
1933 757 1,112 1,329 1,203
1934 948 1,086 1,464 1,210
1935 1,596 1,582 1,537 1,191
1936 2,945 2,113 1,637 1,180
1937 1,393 1,352 1,644 1,184
1938 1,737 1,749 1,731 1,185
1939 1,735 1,731 1,833 1,185

As you can see by the numbers, even though small cap stocks, large cap stocks, and long term bonds had roughly the same value at the end of 1939, long term bonds were more price stable. Stocks had some wild swings and eventually recovered and it would have been a very difficult time as an investor in stocks.

This period shows the value of diversification and how having bonds can keep an account value more stable. It also shows that stocks need to be held with a longer term perspective.

Best Long Term Investment, 1940 - 2006

Four different investments were analyzed: short term bonds, long term bonds, large cap stocks as measured by the S&P 500 index, and small cap stocks as measured by the Russell 2000 index. The question is which of these 4 gave the best return and how much would a $1,000 be worth that was invested on January 1, 1940, as based on data in the book titled Investments by Bodie, Kane, & Marcus?

Short term bonds had a value of $15,916. This investment grew roughly 16 times larger.

Long term bonds had a value of $29,572. This investment grew roughly 30 times larger.

Large cap stocks (S&P 500 Index) had a value of $1,385,213. This investment grew roughly 1,385 times larger.

Small cap stocks (Russell 2000 Index) had a value of $5,713,609. This investment grew roughly 5,714 times larger.

Over the long term the stocks out performed the bonds. Short term bonds only kept up with inflation and really was not a long term investment at all.

With the higher return came higher risk or higher volatility. The length of time that an investment is held is very important. More on the length of time later.

Start saving early and invest well.

The Value of Saving $1 A Day

Sometimes it seems rather difficult to save money to invest for the future. Saving $1 a day can make a difference in the long run. Let's demonstrate by doing a simple mathematical exercise. Obviously, no investment gives the same return each year, this is a mathematical exercise to illustrate a point.

You save $1 a day or $365 in a year and invested it something that gave a 9% return each year to make the calculation easy. Let's look at this at 10, 20, 30, and 40 years.

How much did you save:

• 10 years = $3,650
• 20 years = $7,300
• 30 years = $10,950
• 40 years = $14,600

At the end of each year you invested the $365 and got a 9% return the value of the account would be:

• 10 years = $5,545
• 20 years = $18,673
• 30 years = $49,752
• 40 years = $123,327

If we take the account balance and subtract the amount of money that was put into the account we can determine the increase due to our investment. The growth from the investment would be:

• 10 years = $1,895
• 20 years = $11,373
• 30 years = $38,802
• 40 years = $108,727

What happens is that with time the growth of the investment becomes more than what was invested. The money grew in an exponential fashion.

Letting investments grow with time gives wonderful results.

Equity Mutual Funds

What do we want from an Equity Mutual Fund? The Best Funds to get a higher return with a lower relative risk relative to the average funds.

From the book a Random Walk Down Wall Street by Burton G. Malkiel:

1. From 1988 – 1998 less than 20% beat an industry average index after fees.
2. About 20% of Mutual Funds are worth owning and many are closed to new investors.
3. From 1977 – 1997 an index beat the average fund by about 2% after fees.

What does this mean:

1. AVOID Mutual Funds with Front End or Back End Loads, High Fees and Average Performance.
2. Identify and buy the top 20%.
3. Never pay high fees for an average fund.
4. No load funds are better than a loaded fund. One reason is the lower cost and fees.The other reason is if you have a lower performing fund it is mentally more difficult to sell it when you have a load.

If a no load fund does not perform, find a better one and move on. Why do funds have a load? Is it for your benefit?

Something called the Efficient Market Theory says that the Equity Market is efficient and it is more important to focus on the right allocation rather than a specific fund. Personally, I think it is very important to have both the right allocation and the best fund. It is important to do your homework and buy the best funds.

Modern Portfolio Theory

To an investor, the Modern Portfolio Theory is very important. Here are some key points:

1. Harry Markowitz won Nobel Peace Prize in Economics in 1990 for his theory published in 1950.
2. A key component is the Principal of Co-Variance: Risky higher returning investments, each having their own variance, when combined in certain amounts will have an overall lower amount of risk and maintain higher returns.
3. An example of how to apply this principal is a blend of International and US Equities give a better return and lower risk than just US Equities alone.
4. Why is this important? Because money moves between stocks and bonds and between different parts of the world.

Why is this important? By using the Principal of Co-Variance a higher return can be obtained by using different investments at a given risk level. Making more money and having less risk is always a good thing.

Is anyone smart enough to know the right time to make moves? NO

What is the best thing to do: Diversify, Diversify, Diversify

Investment Trends

Some investment trends to follow:

1. Companies are offering investment options for employees such as 401(k) and not offering fixed dollar amount pensions. Very few employers today offer a pension that pays a fixed amount of income in the future. What this means is that the employee has to be more prudent in investing for the future. The employee must manage retirement dollars instead of the employer and has more at risk now than ever before.
2. The Federal government is offering tax incentives for retirement investing such as a 401(k) or an IRA. Why? One reason is to reduce future liability issues such as Medicaid, etc.
3. Since each person has more at risk in preparing for retirement, it is very important for each person to have a retirement plan and an investment strategy. If investing is done well, a person can have more money than with a fixed dollar pension. Why? because fixed amount pensions tend to invest in safer, lower performing, investments. Over the long term, equity investments have shown to give better performance.
4. More people are investing than ever before so more money is going into investments. This is a positive development for purchasing equities.
5. Private Equity Firms are buying up lots of publicly traded companies leaving a smaller supply of stocks. This is a positive development for purchasing equities.

Each investor should follow investment trends.

Investment Options - The Desired Outcome

What is the desired outcome when you invest? Here are 4 Outcomes

1. Increased return with lower volatility – Make more $$$ with less risk.
2. Take advantage of Modern Portfolio Theory – Investing in a combination of riskier higher returning investments gives higher returns with overall lower risk.
3. Buy Mutual Funds that beat their respective investment average, such as the S&P 500 average, in years when things are going up and going down
4. Take advantage of compounding interest and have the money work for you. We want the money to make more money than the original investment

The bottom line: Making more money than an average investment and doing it in a manner with less risk is a very good thing,

Investment Principles

Here are my 8 Principles for Investing:

1. God expects us to be good stewards
2. Focus on the Long Term
3. Optimize All Resources
4. Must Beat Inflation
5. Always use the Best Investments
6. Diversify, Diversify, Diversify
7. Pay Yourself First
8. Simplify, Simplify, Simplify

Following these principles will give better results with less risk and stress.

Time Value of Money

It is very important to understand the concept of the Time Value of Money

The Rule of 72 is the first concept: Money doubles when the interest rate and the number of years equals 72. An investment that has a 9% return will double in 8 years, 9 times 8 = 72. The reason it is 72 instead of 100 is because of compounding interest.

Growing Money is an exponential function not a linear function. What this means is that getting money to double again is very important. So a small difference in return on your investment can have a huge impact on your money over time.

Let me illustrate: $10,000 invested for 30 years at 3%, 5%, 7%, 9%, & 11%:
3% = $24,272
5% = $43,219
7% = $76,123
9% = $132,677
11% = $228,923

Notice that a 9% return gave about 6 times the amount of money versus a 3% return. If it was a linear function it would have been only 3 times more.

What is the bottom line? Time & Sound Investing is Your Friend

Annual Average Rate of Return for Investments

Average Annual Return from 1926 - 1999 by Investment Type

Small Cap Stocks (Russell 2000) = 18.81% Mathematically, 12.5% Actual
Large Cap Stocks (S&P 500) = 13.11% Mathematically, 11.1% Actual
Commercial Real Estate = 11%
Long Term Bonds = 5.36% Mathematically, 5% Actual
Private Home = 5%
Short Term Bonds = 3.82% Mathematically, 3.8% Actual
Inflation = 3.17%

The best average performance during this 64 Year came from Common Stocks. Small Cap Stocks, as measured by the Russell 2000 index, did the best. Large Cap Stocks, as measured by the S&P 500 index, came in second. Commercial Real Estate came in third.

An investment must beat inflation for it to truly be an investment that grows money. It is very unlikely that bonds and your private home will give the best long term return.

An issue is the amount of Risk – Price Fluctuations. Every Investment has Price Fluctuations – how long do you need to hold it to minimize it? The investments that had the highest return also had the most risk. The holding period for each investment is very important to understand.