Focused on the Long Term

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Dear Friends,
With the S&P 500 Index in correction territory (down more than 10% from the previous peak) investor anxiety levels are understandably elevated. The market faces a number of threats, including inflation, a hawkish Federal Reserve, soaring yields, and war in Eastern Europe. During volatile markets, it’s difficult to focus on anything beyond the short term, but at times like this, studying market history for reminders of the benefits of long-term investing can be helpful for investors.
First, simply put, stocks have gone up over time as shown in the chart below. Based on this 122-year data series of the Dow Jones Industrials, stocks have gained 9.5% annualized, including dividends. That’s a pretty good long-term track record.
So what has driven those big gains for stocks all those years? Earnings, plain and simple. While we don’t have 122 years of earnings data for the Dow, we do have 70 years of S&P 500 earnings per share (EPS) data, shown in the chart below. Earnings have grown at an annualized pace of 7.5% over this time period, consistent with long-term stock price appreciation (excluding dividends).
Though the S&P 500 Index is unmanaged and can’t be owned directly, it’s clear that owning stocks for the long-run has been very rewarding. Moving in and out of the market and potentially missing out on gains can be costly. Stocks experienced some significant downdrafts during the 31-year period shown in the chart (2000-2002 and 2008-2009 to be specific) and yet the S&P 500 Index still rose an average of 9.9% per year during that time.
This has helped us put the latest bout of volatility in perspective and remind us of the benefits of long-term investing. Bottom line, be patient, stick to your plan, and if you have a long-term time horizon with a relatively conservative asset allocation, this might not be a bad time to consider adding some equities.
Please reach out with any questions.
Debbie
Share:
facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

RECENT POSTS

4 Hurdles in Retirement Beyond Your Investment Portfolio

Becoming hyper-focused on only one aspect of a problem is pretty much never a good approach. A racecar driver who only focuses on speed and ignores strategy won’t win races, at least not many of them. A carpenter who only hammers in nails won’t build strong structures. 

Your Silicon Valley Bank Questions Answered

You likely have heard about the recent Silicon Valley Bank (SVB) collapse and probably have questions. Here, we provide you with unbiased answers to your questions.

Thinking About Retiring Early? 8 Things to Consider First

Tom Fridrich, JD, CLU, ChFC®, Senior Wealth Planner We’ve all asked ourselves whether it’s too early to retire (usually after a particularly challenging commute or dealing with a difficult client).  You may have even gone so far as to take a sneak peek at your account statements …

Weekly Update: February 27th

By Debra Taylor, CPA/PFS, JD, CDFA™ Dear Friends, For investors, it may feel like déjà vu all over again as inflation and the Fed dominate market headlines on a day-to-day basis. After all, the numerous market swings last year were driven by ever-changing expectations around the Fed – …

1 2 3 224 225 226

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation

TweetsFollow Us