Once that’s done, though, what isn’t important, in the larger scheme of things, is timing market peaks and troughs. During the great financial crisis, for example, I spent an inordinate amount of time as a journalist speaking with so-called experts about when they thought the stock market would rise or fall. In retrospect, I believe that was a waste of time.
Suppose you had gotten the market cycle as wrong as you possibly could, but had nonetheless decided to become a long-term stock investor — and had actually stuck with it, despite colossal losses. That would have meant buying at the market peak of Oct. 9, 2007. You would have lost most of your money by the spring of 2009, but you would have gained it back, and then some. These are the returns of the S&P 500 from Oct. 7, 2007, through Jan. 18, according to FactSet:
Considering price alone, the index gained 7.1 percent annualized, or 207 percent cumulatively.
With reinvested dividends, the index gained 9.3 percent annualized, or 325 percent cumulatively.
I concede immediately that you could have done better than this by buying and selling at “the right times.”
That would have entailed knowing in real time when the market was going to rise and fall, and no one knows that reliably over long periods. You could also have bought and sold the right stocks. Just owning Apple, for example, and nothing else, in the same period, and never selling it would have given you a total return of 3,760 percent. If you did that, bravo.
But what’s the right stock or stocks to buy for the next 15 years, and what’s the optimal time to buy or sell? Some people will undoubtedly get the answers right.
I’m not even going to try. This market peak means many things to many people. I take it merely as further affirmation of the wisdom of long-term, low-cost buy-and-hold investing. Let’s put this peak behind us, and hope for many, many more.