Once that’s done, what’s not important, overall, is timing the ups and downs of the market. During the Great Financial Crisis, for example, I spent an enormous amount of time as a journalist talking to so-called experts about when they thought the stock market was going to go up or down. In retrospect, I think it was a waste of time.
Let’s say you were as wrong as possible about the market cycle, but nevertheless decided to become a long-term stock investor – and stayed there, despite colossal losses. This would have meant buying at the market high of October 9, 2007. You would have lost most of your money in the spring of 2009, but you would have gained it back and then some. Here are the S&P 500 returns from October 7, 2007 through January 18, according to FactSet:
-
Considering prices alone, the index gained 7.1 percent annualized, or 207 percent cumulatively.
-
With dividends reinvested, the index gained 9.3 percent annualized, or 325 percent cumulatively.
I immediately admit that you could have done better than that by buying and selling “at the right time”.
This would allow us to know in real time when the market was going to go up and down, and no one knows that reliably over long periods of time. You could also have bought and sold the right stocks. Simply owning Apple, for example, and nothing else, over the same period, and never selling it, would have given you a total return of 3,760%. If you did that, well done.
But which stock(s) should you buy for the next 15 years, and when is the optimal time to buy or sell? Some people will undoubtedly find the right answers.
I’m not even going to try. This market spike means a lot of things to a lot of people. I view this as simply further affirmation of the wisdom of long-term, low-cost buy-and-hold investing. Let’s put this summit behind us and hope that there will be many, many more.
