Investing, Not Speculating, is the Key to Long-Term Wealth
As the stock market makes new highs and headlines, the pundits continue to debate which stocks will outperform. And how high could the stock market go? Or will a bear market wipe out all recent gains?
You’ll get wide disagreement among market professionals on these issues. Even worse, some people now think the stock market is just a "game" to be won on a daily basis.
Stop. Please just stop.
Take a look at “the market” itself. It has just made all-time highs. That means that anyone who just “owned the market” (as defined by the Standard and Poor’s 500 stock index) has made enormous profits over the past 50 years — a lifetime of investing.
It was just 50 years ago that the Dow Jones Industrial Average broke above 1,000! If you had contributed just $2,000 a year to an investment account, and earned the average return of the S&P 500 over those 50 years — roughly 10% with dividends reinvested — your account today would be worth more than $2.5 million.
Yes, 50 years ago index funds were not widely available to individual investors, and IRAs were not yet conceived. Still, that $2,000 a year investment works out to about $40 a week.
It wasn’t easy to stick to an investment plan during those 50 years that included the Vietnam War, double-digit inflation, a prime rate as high as 21%, and several steep market declines.
Yet here we are today with the stock market at all-time highs! Warren Buffet said it best: “No one ever got rich betting against America!”
A Plan is Required
Having a good plan and sticking to it during emotional times is the key to long-term investment success.