For long-term stock investors, this market peak won’t matter

For long-term stock investors, this market peak won't matter


However, once this is done, in the larger scheme of things, what is not important is the timing of the market peaks and troughs. For example, during the great financial crisis, I spent an inordinate amount of time as a journalist talking to so-called experts about when they thought the stock market would rise or fall. Looking back I believe it was a waste of time.

Let’s say you misunderstood the market cycle as much as possible, but still decided to become a long-term stock investor – and actually stuck with it, despite huge losses. This would mean buying at the market peak of October 9, 2007. By the spring of 2009 you may have lost most of your money, but you’ll have got it back, and then some. According to FactSet, these are the returns for the S&P 500 from October 7, 2007, through January 18:

  • Considering only price, the index rose 7.1 percent on an annual basis or 207 percent cumulatively.

  • With reinvested dividends, the index rose 9.3 percent annually, or 325 percent cumulatively.

I readily admit that you could have done better by buying and selling at the “right time”.

This would involve knowing in real time when the market will rise and fall, and no one knows this reliably for a long time. You could also buy and sell the right stocks. For example, owning only Apple, and nothing else, over the same period, and never selling it, would have given you a total return of 3,760 percent. If you did this, well done.

But what is the right stock or stocks to buy for the next 15 years, and what is the optimal time to buy or sell? Some people will undoubtedly get the right answers.

I’m not even going to try. This market peak means a lot to many people. I simply take this as confirmation of the wisdom of long-term, low-cost buy-and-hold investing. Let’s leave this peak behind, and hope for many more.



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