This year has been really painful for both aggressive and conservative investors alike as really once-in-a-generation levels of inflation have finally pulled us out of more than a decade of artificially low-interest rates and that carnage has been felt by all. Now, a question I seem to be getting asked more frequently is, are we at the bottom yet? For some, the root of that question is wanting to know when the bleeding will stop, but for many, it’s wanting to know if it’s safe to invest again or worded another way “Is now a good time to buy?” And the answer to that question really depends on what your investment horizon is because if you invest long enough, there really isn’t a bad time to buy stocks. In fact, if you were to buy the s and p 500 just once at the market peak, right before the great financial crisis, and held through today, you would’ve more than doubled your money in 15 years.
That’s an 8% annual total return, which is right in line with the market’s long-term average. So the worst timing of the past century produced historically average returns over the last 50 years. If you were to invest in the global stock market for just one day, your chances of earning a positive total return would’ve been 53%, or basically a coin flip. If you extended your holding period to a quarter or three months, your probability increases to 66%, hold it for a year, and that probability increases to 73%. And over a 10-year period, your probability of earning a positive total return was 94%. That’s why here we are constantly going back to the mantra that time in the market is a better strategy than trying to time the market. Of course, it’s every investor’s goal to buy low and sell high, but history consistently shows that the smartest thing you can do is to simply buy and hold.
I’m Daniel Mannix with Provise Management Group, Financial Planning for Your Life and Lifestyle.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the U.S. stock market in general. You cannot directly invest in the index.