Investing by the Numbers: Are You on Course?

When put in a stressful situation, it’s easy to resort to our instincts and emotions. Which can be both good and bad. Courage and patience help; fear and hastiness hurt. But what is often most effective is direct, objective information to guide us forward. This is true in all critical situations, whether it’s investing or flying a plane.

Perhaps, no other unprecedented incident in recent memory has captivated our imaginations more than the “Miracle on the Hudson.” Most people generally know the unbelievable story of Capt. Chesley Sullenberger landing U.S. Airways Flight 1549 in the Hudson River off Manhattan after the plane collided with a flock of geese. And, most people would likely attribute his extraordinary feat to his temperament and intangible qualities, like bravery, fortitude, self-control, etc. But how he pulled it off comes down to something more methodical. In fact, Capt. Sullenberger gives credit to a “culture of teamwork,” where the flight crew openly exchanges vital information.   

Sullenberger said he knew he would need to lift the nose of the plane at just the right moment to slow the descent of the plane. [Co-pilot] Skiles helped by calling out the plane's speed and altitude, allowing Sullenberger to land the plane with surprisingly little impact.

The importance of flight data and information in how the “Miracle on the Hudson” unfolded provides a valuable lesson for investors.

Even in the best of times, investing involves uncertainty and the potential for surprises. No investment plan is 100% foolproof. But it’s possible to increase the chances of reaching your financial goals. As an investor, you can use averages and checkpoints as a tool to guide your investment decisions.

Here is a compilation of various investment-related numbers. Looking at these data points may help you find areas of improvement or give you a boost of confidence knowing that you’re on the right track.

However, there is a big caveat. Though we’re all traveling in the same investment environment, we have our own unique courses to chart, using our own investment and savings vehicles.

Capital markets

11.3%: annual average total return of stocks

5.9%: annual average total return of bonds

8.9%: annual average total return of a 50/50 portfolio

3.6%: average rate of inflation

Over the long term, stocks have generated higher returns than other assets, making them an essential part of your portfolio for both growth and inflation protection. In addition, a diversified portfolio of different investments lets you limit risk without sacrificing a lot of potential growth.

263%: total return of the average bull market

71: duration in months of the average bull market

-33%: Total return of the average bear market (a decline of 20% or more)

43%: gain needed to recover from a 30% loss

14: duration in months of the average bear market

6: average frequency in years a bear market occurs

55%: average 12-month return after a steep market decline

75%: percent of the time the stock market has ended with positive returns in the past 40 years

-13.8%: average annual intra-year market drop in the past 40 years

2: number of weeks six of the best 10 market days occurred within the 10 worst days in the past 20 years

$1,568,121 : $360,458: growth of $10,000 investment in S&P 500 return with dividends reinvested versus price return only over a 50-year period

Market downturns are a part of investing. But markets have historically always recovered. Since it is hard to determine when they will occur and when they will end, it is best to take steps to manage risk but stay invested for the long term.

Investment accounts

56%: percent of U.S. households that have employer-sponsored retirement plans

33%: percent of U.S. households that have assets in an Individual Retirement Account (IRA)

27%: percent of U.S. households that have both an employer-sponsored plan and an IRA

$112,300: average 401(k) account balance

8.9%: average employee 401(k) savings rate

13.5%: average total 401(k) savings rate (employee contributions + company match)

An ideal savings rate is 15%, which is comprised of both your contribution and your company match, if any. If you contribute 10% and your company matches 5%, you’ll meet the 15% savings goal.

$115,400: average IRA balance

$4,200: average IRA contribution amount

84%: percent of traditional IRAs opened with a rollover

Rolling over your workplace retirement accounts into an IRA can let you conveniently manage your assets all in one place and potentially lower your investment costs.

$331,000: average combined balances for people with both a workplace retirement plan and an IRA

$93,100: average 403(b)/tax exempt account balance

20.1%:percent of employer-sponsored retirement plan participants with loans outstanding

4.97%: percent of employees taking a hardship withdrawal

The most common reason for taking a loan is to pay high-interest credit card debt. There are various reasons not to touch your retirement accounts for immediate financial needs. For one, withdrawing money from your account before turning age 59 ½ can result in a 10% tax penalty. Most importantly, it will reduce the benefit of compounding interest in your account over time.

$2,803: average Health Savings Account (HSA) balance

HSAs are potentially a good savings vehicle because contributions are tax-free, growth is tax-free and withdrawals are tax-free when used for qualified medical costs.

80%: percent of assets, on average, that 401(k) participants in their 20s have invested in stocks

55%: percent of assets, on average, that 401(k) participants in their 60s have invested in stocks

36%: percent of millennial households willing to take “above-average or substantial investment risk”

31%: percentage of baby boomer households willing to take “above-average or substantial investment risk”

One investing rule of thumb is to gradually reduce investment risk in your account as you age. How much risk is appropriate depends on your goals, needs, assets and overall emotional tolerance.

0.48%: average expense ratio for U.S. open-end mutual funds and exchange-traded funds

1.02%: average financial advisory fee for $1 million investment accounts

You can’t control the market, but you can control your investment costs. Lowering the amount you pay in investment fees will let you keep more of your investment returns.

Financial goals

73%: percent of investors who say their primary financial goal is retirement

82%: percent of workers who expect to use a workplace retirement savings plan as a retirement income source

$500,000+: how much 63% of workers say they will at least need for a comfortable retirement

10.1x: how much a $100,000 total income household should have saved by age 65 ($1,010,000)

$187,300: median net worth for head of household ages 55-64

What specific amount you should save and invest for retirement depends on your goals, needs and other income sources.

Financial advice

25%: percent of Americans who have a written financial plan

28%: percent of workers who are working with a professional financial adviser

82%: percent of people with a written plan who have a strategy to generate income that could last 30 years or more

93%: percent of those who developed a written retirement plan who were “confident” and/or “happy” with it

62%: percent of those with a financial plan who feel financially stable, compared to 32% of non-planners

20x: amount more people with full financial life plans had saved than those who have plans for less than one year

3%: percent of value in net portfolio returns investors may receive over time by working with a financial adviser

Investment returns don’t come in a smooth straight line. There are highs and lows along the way. Planning as early as possible helps keep you moving forward and prepares you for making the right decisions at the right time. That makes a bigger difference in reaching your goals than any mental or emotional quality or attribute.

As Capt. Sullenberger wrote: “We all have heard about ordinary people who find themselves in extraordinary situations. They act courageously or responsibly, and their efforts are described as if they opted to act that way on the spur of the moment... I believe many people in those situations actually have made decisions years before.”