So whenever you’re having that 19th nervous breakdown thinking about your portfolio, just breathe deeply and hum the Rolling Stones’ 1964 hit “Time Is on My Side.”
“You’re trying to fund your retirement over the next 20 years. Hedge fund managers have to woo their clients every month. You’re saving for your kids’ education next decade. Mutual fund managers have to fret about the next quarter. You can look years down the road. Traders have to worry about the next ten milliseconds,” the article points out.
Of course, if you’re as old as one of the Stones, you have a little less of that time in the run-up to retirement age, but even a few years can still give you something to rock on.
“I took monthly S&P 500 prices going back to 1871, adjusted them for inflation and dividends, and looked at returns based on various holding periods,” writer Morgan Housel notes in the article.
“Holding stocks for less than a year amounts to little more than flipping a coin. You are almost as likely to lose as you are to win.
“But the odds of success grow perfectly with time. If you hold for five, 10, 15 years or more, the odds of earning a positive return on stocks after inflation quickly approach 100 percent, historically.
“The irony is that while Wall Street has more information than you, its short time horizon forces it to deal with more randomness than you have to. That’s your edge. And it’s why any bumpkin who buys an index fund and forgets about it will beat the vast majority of professional money managers over time.”
Housel calculates that the worst any 30-year period has done is double a sum of money about two-and-a-half times, after inflation.
So, if you’re not rolling after mere monthly benchmarks, you’ll surely gather some moss.
BetterInvesting is a national nonprofit organization that has been empowering individual investors since 1951. Founded in Detroit, the association (formerly known as National Association of Investors Corporation) was born out of the conviction that anyone can become a successful long-term investor by following commonsense investing practices. BetterInvesting has helped more than 5 million people become better, more informed investors by providing webinars, in-person events, easy-to-use online tools for analyzing stocks and mutual funds, a monthly magazine and a community of volunteers and like-minded investors. For more information about BetterInvesting, visit its website at http://www.betterinvesting.org/investing/landing/openhouse/blog/index.html or call toll free (877) 275-6242.