Is Long Term Investing Still Valid?
The stock market is has sure had its share of ups and downs over the last few years. In fact over the last few years it doesn’t seem like much has really happened. Does this mean that buy and hold is gone for good? Does it still work?
Well, all the evidence seems to suggest that it is still a valid way to make money. Just because there have been a lot of ups and downs in recent years doesn’t mean that it isn’t very profitable to hold stocks for the long term, say 20 years or more.
1. There Have Been Lots of Flat Times
Everyone wants to believe that if something happens in the market in the last 3 or 4 years that it predicts what will happen to the market in the next 20 years. No, there have been lots of times when the market has been trending sideways for years only to break out of it and start going up again.
Only the people who hung onto their stocks and didn’t give up profited as the market continued its uptrend later on.
2. History is a Good Indicator
Over the long term the major indexes such as the Dow Jones and the S&P have gone up and they continue to go up. In fact, aside from buying at the top of the great depression if you would have invested into strong stocks and held them for 20 years during any point in the past it would have been profitable. History repeats itself more often than not.
3. Dividends
If you do look at a chart of the major indexes you are not seeing the whole picture. Yes stocks profit from the appreciation, but they also profit from dividends. So even if stocks stay flat they can still be more profitable than other investment options such as bonds.
The stock market has been a pretty profitable way to make money over the long term in the past. But who knows what will happen in the future. In the end you always take risks by investing into stocks, but those risks would have worked out in the past.
For more on the Dow Jones Historical Closing Statistics and it’s returns or for more information on how the stock market has done over the long term visit this Stock Market History chart page.
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