Welcome to my blog post: It’s March 14, 2019 and I’d like to give you a quick overview of what’s happening in the stock market and talk to you about strategy. Let’s talk about what’s in the background, there’s a lot to worry about:
- Trade wars
- An unpredictable US leadership
- Rising government debt
- Possibility of rising rates
- Possibility of a recession in the next 1 ½ yrs.
It all sounds pretty grim, however let’s put this in the right context. Here are the stock market returns for different periods:
- YTD Dow Jones Index return: 10.2%
- 1 yr Dow Jones Index return: -3.5%
- 5 yr Dow Jones Index return: +12.2%
- 20 yr US market return: +9.7%
If you’re invested in good quality stocks, you shouldn’t worry. Anyone that has at least a 5 year investment horizon should do just fine. Investors always worry that they’re buying at the top of the market. However, think of this – when I started in the business back in 1984, the Dow Jones was at 1100, today its around 26,000 and there were plenty of ups and downs.
First there was the crash in 1987 when the market dropped by about 1/3 in a matter of days. Most investors were devastated, but those that stuck to the plan recouped very quickly.
Then in 2000 there was the Tech boom, which saw tech stocks like Nortel go way up and value stock like the Banks go way down. People that were invested in quality stocks saw their portfolios lose value while the tech stocks were having a party. It took about 12 months and then things came back to normal – Tech stocks crashed and money flowed back into good quality stocks.
Then there was 2008, the credit crisis made stocks drop by almost 50% and once again those that were patient were rewarded again. The last 10 years were very rewarding for the patient investor.
The bottom line is that human nature forces us to always believe that we’re investing at the top and that there’s a big correction waiting to jump out around the corner. The facts say otherwise, the best thing you can do is invest wisely and stay invested for the long term. Don’t let you short term emotions take over your long-term sense of value.
Author of Purple Chips