Hello Loyal Readership!,
Today I want to discuss some cliché but truthful facts about the market and keep it simple.
If we look back and we look forward, history has shown us that market continues to rise over time, but it is not a straight line, it is a wavy line. I fully expect this trend to continue in the future. Take a look at the graphic below illustrating various domestic, global, and economic events we have been through, but despite all of these unnerving moments the market continues to rise over time and someone who had invested $1 in the S&P 500 in 1970 would have $80 in 2021 just by staying invested.
A disciplined investor looks beyond the concerns of today to the long-term growth potential of markets.
The problem is most investors get in their own way. They see the current investment “apocalypse du jour” and react. This is not to not be sensitive to whatever the event that is going on – these are real events affecting people’s lives, but just not their long-term portfolio. For example, when oil prices quadrupled in the mid-70’s many investors were tempted to exit the market and “cut their losses”. But those that don’t get in their own way experience the gains that the market features by just saddling in and riding for the long term. As you can see in the graphic below, over the last 20 years, the “average investor” only received a 2.9% rate of return while the S%P 500 did 7.5%.
The final piece I want to share as to why you need to stay invested is because the best days occur without warning, often near the worst days. So if you ride out the worst days, you will subsequently closely capture the best days. But if you miss the best days, that has a lasting impact on your growth.
Stay invested. It’s a simple truth.
