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Investing, Not Speculating, is the Key to Long-Term Wealth

Terry Savage, Tribune Content Agency on

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.

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