Crews Bank & Trust Blog

The Average is Rare

Today’s Chart of the Day from Jeroen Blokland, @jsblockland on Twitter, shows the distribution of one year of returns from the Dow Jones Industrial Average going back to 1900.

The average return is 7.5%; however, the number of years the return came in between 5-10% was only 11 out of 123 years. This is less than 9% of the time and shows getting the average return in a calendar year is quite rare.

What does this tell us? It says that even though we may expect a certain return, we often don’t overtly see it, just subtlety realize it over a span of years. Therefore, in the short-term, there is no need to get too happy when a year has a higher-than-average return or too angry when it is less.