One Investing Chart Shows Why the Long Term is What Really Matters


We’re now in the ’20s, can you believe it? Cue the jazz music and all-time stock market highs from all that investing!

Well, perhaps jazz music won’t be as popular as it was a century ago, but we have had a rather vibrant economy at the moment as we did in the 1920s, and the stock market has been reflective of that. Both the Dow Jones Industrial Average and S&P 500 continue to work upwards, giving solid returns for investors.

“But wait! This won’t last forever!” some folks say. Yes, that’s true. The market will correct at some point and there will be another downturn.

As of the time I am editing this article, we are in the midst of the Coronavirus economic fallout after governments shutdown down our economy. Lots of people have lost their jobs and there have been some significant losses in many people’s 401ks and IRAs.

But wait! That doesn’t mean the end of the world.

Remember back in 2008 when it seemed like the world was ending as folks lost everything they had saved for retirement? Well, it’s not exactly that simple.

Many folks lost so much in their 401ks and IRAs because they sold while the market was down. The traditional money-making rule of thumb in investing is to “buy low, sell high.” When folks began to sell shares in their retirement accounts while funds were on the way down, that’s where they lost the money.

Consider this possibility. What if folks stayed in instead of bailing out in the middle of the ride? What if they bought more while the market was down? Do you know what things look like since 2008?

Here’s the investing chart that tells the story, from Yahoo Finance:

Image obtained from Yahoo Finance

This chart runs from 2000 to January 2, 2020. In December of 2000, the S&P 500 was at 1320.28. By the decade’s low point in March of 2009, the S&P dipped to 676.

But wait! By 2011, the market had almost completely bounced back to its place before the Great Recession.

Fast forward to now. On January 2, 2020, the S&P 500 closed at 3,257.85. That’s many times over what it was at that the 2009 low point. Imagine if the folks who pulled out of the market had stayed in and experienced all of that growth over the past decade?

And let’s not forget the dot-com bubble that burst in the early 2000s, which also sent many people into a frenzy. What ultimately mattered was not the temporary downturn, but the longer-term trends of the market. Looking out over a long period of time, the data is right there to show us that truth.

The investing chart tells one story: what matters is not the lows or the highs, but the long term track record. The best investments are made for the long term and are done intentionally, methodically, and consistently.

The ones who get hurt on a roller coaster are the ones who jump off in the middle of the ride.

This is why I strongly suggest working with a trustworthy investment advisor to guide you through the highs and lows, and to protect you against the times when the market feels like a roller coaster. The advisor will help you make informed decisions that are in your long-term best interest amidst times that cloud better judgment.

Use the SmartVestor program to find a sharp and trustworthy advisor in your area!

To prepare yourself for good long-term investing, it’s also important that you understand the foundations of personal finance. Schedule your free Discovery Session with me to equip yourself with the power of information and self-discipline.

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