The stock market has been doing very well over the last eight years which has prompted many to think that now is a good time to get out. Following are two articles where professionals make predictions about how it’s not a good time to be in the stock market. However, the research continues to pile up pointing to the fact that it is not a wise investment strategy to choose investments or investment managers that are predictive in nature. Has no one learned their lesson yet???
The two articles are titled Investors Fear Sustainability of Dow Gains and Just Say No to the S&P 500. It’s human nature to think that if something is going really well that it will eventually stop. But it would be dangerous to have that mentality with investing. The stock market has had a good run since 2009 (8 years with no losses) so you may think that it’s wise to quit while you’re ahead. But that could result in you missing out on a lot of wealth creation.
HISTORICAL STOCK MARKET RETURNS
I was reviewing historical stock market returns this past week as part of some investment research I’m doing and I was reminded that the stock market can be positive for an extended period of time. For example, did you know that from 1943 to 1973 the S&P 500 had positive 3-year returns for 31 years in a row? In other words, there was no 3-year period (measured from calendar year to calendar year) during that time span that had a negative return. This also happened from 1976 to 2000 when 3-year returns were positive for 25 years in a row. So, how does that compare to today? Today, the S&P 500 has had positive 3-year returns for 6 years in a row (2011 to 2016) suggesting at least historically, there could be more room for growth. But of course nobody knows for sure!
So much effort and energy goes into trying to avoid the bad years (which historically are far less than the good years) that people end up with less wealth and more frustration.
Please feel free to share comments, questions, or experiences below.
If you’re new to our blog and wish to receive weekly financial planning tips, please sign up for our eContent.