Does long term investing still work? Over the last few years there have been many ups and downs and this has lead some people to believe that long term investing is dead. So is it? Does investing into a diversified portfolio still work over the long term?
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. Stocks can be volatile
We want our time to be unique, when something bad happens we want to believe that it is just because our time is the end of bull markets. But in reality there have been plenty of times in the past were stocks have trended sideways or gone up and down for many years on end.
The investors who made money during sideways trends where those who simply looked for good investments and hung onto them until the market finally broke out of its sideways trend and went up.
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. Dividend Stocks
If you do take a look at the long term chart of the major indexes you are still not seeing the whole story. They also paid out dividends. These dividends alone can make them better investments then other similar securities like bonds or CDs.
All and all the stock market has been a profitable place to invest money over the long term and the last few years haven’t changed that. There is no way to tell for sure if the stock market will be a profitable place to buy and hold in the future, but history looks good. And in the end that is all we can really say.
For more on the Dow Jones History and it’s returns or for more information on how the stock market has done over the long term visit this Stock Market History Graph page.
