Short answer … No.
The key during the early years are your contributions. (See the Dark Blue line). You need to plant the seeds that can then grow later. I show below how it took 13 years for returns to overcome the power of contributions. And of course, you control contributions while your control over returns comes with risk.
This “returns are better than contributions” is an impression I commonly see expressed by my clients. A picture is better than words so I graphed a few examples using 4% and 8% returns*.
It is clear that saving $6000 a year is better than just saving $6000 once (bottom two lines). It is also clear that continuing to save is better than stopping (red and purple lines divide at 10 years). It is also clear that starting early is better than later (the green line is starting late … and you can compare that to the purple line when contributions were stopped at that same point) It will take more of your money to catch the green line up with any of the other annual contribution lines. Also, higher returns are better. But that is with a caveat (see the two links below)! Finally, saving a bit more may be better than reaching for greater returns (with greater volatility) … see the dark blue line which has the lower 4% return in this example (it took 13 years of returns to overcome the higher contribution rate … conclusion saving more in the short term is better than reaching for returns).
Contributions now (those first 10 – 13 years) have the most impact on results versus market returns. Note that the lines are all close to each other early on. Market returns have an impact during later years. But, those later years don’t come unless you’re already making contributions now (the early years)!
Moral of the story: Contributions are important! If there are no contributions, there is nothing to grow. Start early rather than later. Save more rather than less. Reaching for returns comes hand in hand with volatility which serves as a drag on return (see links below for more on this point). Returns come from prudent portfolio allocations (see other commentary for this point).
Another perspective on Returns … It’s Not Just About Returns.
* Note these are NON-volatile returns so I include educational links as to the effect of volatility on returns (nut shell … you can’t get high returns without some volatility; the higher the return sought, in general the higher the volatility (they go hand in hand); and lastly volatility is a drag on returns).
For more on the volatility effect on returns please see these two links:
The values depicted are of what the stated dollar value may have grown to over the time period indicated without volatility of returns and are for comparative purposes only. The hypothetical examples do not represent the returns of any particular investment.