Solid returns have come even with bumps in the road.
Is now the right time to buy stocks? It’s a question that’s been asked countless times, and whenever I field it, my answer is the same: “Yes!”
That might seem crazy, but I assure you, it isn’t. Here’s why: Over the long term, investing in a benchmark stock index like the S&P 500 (^GSPC 0.40%) has always proven to be a winning strategy — even if someone’s timing is horrible.
Still don’t believe me? Then take a look at this chart:
This is the S&P 500 dating back to 1957, when the index expanded to 500 companies and acquired its current name. Since then, it has increased by an astounding 14,000%. That works out to a compound annual growth rate (CAGR) of 7.5% — and that’s before accounting for dividend payments.
During that stretch, there have been many corrections, several bear markets, and 10 full-blown recessions. And yet, no matter when someone bought, they would have made money — if they had stayed invested in the market.
Image source: Getty Images.
There’s a lesson here: Timing the market is folly. Many fortunes have been made by people claiming to know when the right time to buy — or sell. But far more money has been left on the table by investors trying to time the top or the bottom.
The best advice is the simplest: Avoid trying to predict price movements in the short term. Instead, save what you can and invest for the long term. Ignore the headlines — particularly when the market is going down. And whenever you have doubts, glance at the chart above and remember: Stay patient, hold your stocks for the long term, and you’ll come out a winner.
Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.