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March 10 market sell-off was a good example of two kinds of investing risks: overall market and stock-specific risks.
When you invest in a single stock, you are not only subject to overall market risk, but also risks that are unique to that company.
When you invest in a broad-based index fund, you can minimize both risks by diversifying.
March 10, 2025 Stock Market sell-off:
Dow Jones –
Dow Jones Industrial Average -2.08%
S&P 500
Standard & Poor’s 500. – 2.70%
NASDAQ
NASDAQ Composite – 4.00%
VTI
Vanguard Total Stock Market – 2.72%
TSLA.
Tesla, Inc. -15.43%
“Since the beginning of 1950, there have been 38 corrections in the S&P 500, which works out to an average double-digit decline in the benchmark index every 1.87 years. On average, a market decline of at least 10% has happened about once every 19 months, going back to 1928.” – Fool.com in 2021.
That’s the data for the somewhat calm S&P 500. Individual sectors and stocks can and do behave differently from this and can be more volatile.
What I’ve gotten from statistics such as this is that investing in stocks, and indexes will be a bumpy ride, with frequent, normal downturns. The stock market will return an average 6.6% over 20 years (some say 10% per year). Some periods are better than others. To illustrate:
2024: +21.5%
2023: +22.1%
2022: -23.1%
2021: +20.2%
2020: +16.9%
A useful chart that I use is the “Callan Table of Periodic Returns”. A pdf can be downloaded. The most recent shows the returns of various asset classes from 2015 to 2024.
In 2015, 2018 and 2022 the best returns by class reached only 1.87%!
In 2024 (an unusually positive year), here are the returns:
Large Cap +25.02%
Small Cap 11.54%
High Yield 8.19%
Emerging Market 7.50%
Cash 5.25%
Developed Ex-US Equity 4.70%
US Fixed Income 1.25%
Real Estate 0.94%
Global Ex-US Fixed Income -4.22%
The magnitude of stock market downturns is not of concern to me, but duration is. Think of the long bear markets beginning in 1970 and 2000. These can provide major setbacks to one’s finances. I’ve experienced both.
Thanks Dennis. To further illustrate your point…
VXUS
Vanguard Total International Stock Index
+0.01%
I wrote this 2 years ago about the strangeness of March 10th!
March of History – HumbleDollar
It was good to read that article again. I tried the ChatGPT and received various possibilities that contribute to this phenomenon.
I enjoyed your article. You raised an interesting point about March and financial markets.
As a long-view investor the single most important data point for me is cumulative 10-year returns (with reinvestment). Yes, this is backward looking; but everything forward looking is just a guess. I also have a list of annual performance for each of my current investments for as far back as data is available. From this I estimate how my portfolio would have handled prior market events and determine if I could also handle these.
And I keep this posted in my office for times like these:
Frequency of stock market declines
-5% 3 times per year
-10% 1 time per year
-15% 1 time every 4 years
-20% 1 time every 6 years
-30% 1 time every 18 years
Dennis – We too have never owned TSLA because it has always seemed outrageously expensive. However, we indexers have all massively benefited from TSLA and the other high-flying growth stocks. In fact, I wish we did own TSLA as even with the recent huge pullbacks TSLA is up 183 times since the 2010 IPO versus the S&P 500’s increase of 5 times.
Yesterday did really hurt as, in addition to the S&P 500, we also own a bunch of Vanguard’s IT index ETF (VGT) which declined a whopping 4.5%. Ouch! However, VGT is up 4.3 times since we bought it in 2017 versus the S&P 500’s increase of 2.4 times. We are invested for the long term despite the gut-wrenching short-term gyrations in the tech-oriented ETF.
As a long-time coach, I’ve learned that when you get to the finals, it is often best to stick with the team that got you there.
John,
Congratulations for outperforming the broad market with Vanguard Information Technology ETF(VGT), but I wouldn’t have the stomach to own it because, as you said, it can be highly volatile.
You can reduce the risk even further by being well diversified. My portfolio is 32% US stock, 13% international, 35% bonds, and 10% cash.
The Morningstar’s US Index dropped 2.7% while my portfolio dropped 0.53%.
A reason not to buy individual stocks? A share of Tesla has dropped 53% since its peak on 12/17/24
To track what’s happening in different market segments (U.S. vs. foreign, growth vs. value, large vs. small), I’ll occasionally filter ETFs using this tool from Vanguard:
https://investor.vanguard.com/investment-products/list/etfs
The change from 2024 to 2025 is eye-opening. I hope there aren’t too many HD readers who are betting the bank on U.S. growth stocks.
Thank you for that link, Jonathan.