Investing for Your Time Horizon
Quote on market predictions: “I have correctly predicted 22 of the last 3 market crashes”
The S&P 500 is hovering around 19% off its previous high.
If you were investing money that you need right now, you would have reason to panic.
But any money that you need in the short term, should not belong in the market to begin with.
When it comes to investing, you are allocating your money towards a future goal whether it be 5 years, 10 years, or 30+ years from now. As you get closer to your timeline of needing the money, you pull it out of the market.
It does not matter what stage of life you are in.
If you are in your 30s, you have may have cash on the sidelines for emergencies, buying your first house, etc. and then you are investing money that you will intend to access 30 years from now in retirement.
If you are retired in your 60s, you have cash on the sidelines for funding your current living expenses and then you are investing money that you will intend to access 30 years for when you are still kicking in your 90s.
And if you are in your 90s, you have cash on the sidelines to fund your living expenses and you are investing money for your legacy, perhaps setting up a trust for your children, grandchildren, or even future generations that are not yet born.
One should always be investing for the future.
If we all agree that we do not intend on accessing our investments in at least 5+ years, let us look back at the price of the S&P 500 (the broad market) throughout history.
The current price of the S&P 500 is around 3900.
5 years ago, it was 2647, a 48% gain since then. 10 years ago, it was 1416, a 176% gain 20 years ago, it was 936, a 318% gain 30 years ago, it was 431, a 807% gain
The cost of earning these long-term returns is to experience and expect downturns along the way.
I do not know what the next 30 years will look like, but I take comfort in knowing that there has never been a 30-year period in market history where the market has delivered a negative return.
Knowing that, I will stay steadfast in investing today for the future.
Historical article · Originally published September 2022. Market data and tax rules reflect the original publication date. Past performance is not a guarantee of future results. Editorial and compliance review pending.