NEW YORK (MainStreet) Holding onto your investments during a volatile stock market can help you double your money.
If you invested $10,000 in 2004 in the S&P Composite Stock Price Index, it would be worth nearly $20,000 today. Or if you had socked away $10,000 in 1989, it would be worth over $107,000 today while if you had invested $10,000 in 1964, it would be worth over $1 million today.
A new Bankrate.com investing calculator which tracks the S&P Composite Stock Price Index performance over time can show investors how much their money is worth if they leave it in the stock market. Bankrate.com created this calculator using stock prices from Robert Shiller, the Yale economist. These calculations assume dividends are reinvested.
These impressive returns highlight the power of compounding and why it is so important to stay in the market through its ups and downs. The $10,000 invested in 2004 is a good example: the Great Recession hurt, but that investment still nearly doubled over the past ten years.
"Once you are invested in the stock market, just stick with it," said Bankrate.com senior investing analyst Sheyna Steiner. "Your money will eventually compound and will receive dividends and interest that will aid in the compounding. If you stick with your plan, over time you will have saved a lot of money even if you don't add a cent."
Investors in their 20s and 30s can take more risk and allocate more of their money in equities, but should maintain a diversified portfolio, she said.
"If you have a long period of time before retirement, you should take more risk to ensure as much return as possible, but dial back your risk when you are closer to retiring," Steiner said.
Rebalancing your portfolio during a downturn is a better option than selling stocks, she said.