Does long term investing still work? Over the last few years there have been many ups and downs and this has lead some people to believe that long term investing is dead. So is it? Does investing into a diversified portfolio still work over the long term?
Well, all the evidence seems to suggest that it is still a valid way to make money. Just because there have been a lot of ups and downs in recent years doesn't mean that it isn't very profitable to hold stocks for the long term, say 20 years or more.
1. Lots of Flat Times
Everyone wants to believe that if something happens in the market in the last 3 or 4 years that it predicts what will happen to the market in the next 20 years. No, there have been lots of times when the market has been trending sideways for years only to break out of it and start going up again.
Only the people who hung onto their stocks and didn't give up profited as the market continued its uptrend later on.
2. History Looks Good
Over the long term the major indexes such as the Dow Jones and the S&P have gone up and they continue to go up. In fact, aside from buying at the top of the great depression if you would have invested into strong stocks and held them for 20 years during any point in the past it would have been profitable. History repeats itself more often than not.
3. Dividend Stocks
If you do take a look at the long term chart of the major indexes you are still not seeing the whole story. They also paid out dividends. These dividends alone can make them better investments then other similar securities like bonds or CDs.
In the end no one can say for absolute certainty that stocks will be profitable or not in the future. The only thing we know for sure is that in the past they were. So keep that in mind when deciding whether to invest or not.
For more on the Dow Jones Historical Closing Statistics and it's returns or for more information on how the stock market has done over the long term visit this Stock Market History page.
