No. of Recommendations: 12
The people who have reaped the rewards of what the market has delivered over the last 15 years are the people who stayed fully invested in index funds through...
It's a good list. Most geopolitical events, in particular, can not even be spotted on long term charts, let alone offer a lasting effect.
But there is one perhaps useful exception:
Looking back to some periods in the past, like 2000, the people who reaped the rewards were those who did NOT participate in bubble valuations. Starting from the March 2000 peak, the S&P 500 real total return without any taxes was still negative over 13 years later. That's maybe half the usual investing career, not just a transient blip to live through with a cheery attitude. It was well under 2%/year at the 20 year mark.
The most recent anniversary was the 23 year mark last year. That wasn't exactly a market bottom, and there has been a long running trend of increasing valuation levels, so things should have looked good. Yet the people who bought at the 2000 bubble peak had still made a real total return of only 3.6%/year. I am sure they can contain their excitement. After all, if you pay twice as much as fair value for something, you still have an investment portfolio worth half as much even after an infinite number of years of patience in a market rising on trend.
Geopolitical stuff usually doesn't matter. But price matters a lot.
Don't get me wrong. If the broad cap-weight US market is at clearly very high valuation levels, there is no need to try to time the market by going to cash. That's both time consuming and extraordinarily difficult.
Instead, just don't own the broad cap-weight US market at those times! I wouldn't hold SPY today if you paid me. Instead, just hold stuff a bit more selectively that isn't, by itself, as overvalued. There's always something that isn't so bad. Conversely, when markets are not crazily priced and a bull market is still underway, there is no point trying harder than owning an index.
Jim
