Curb Your enthusiam, part II
- March 6, 2010
- 1 comments
- Posted in Investing, Latest Posts
Stocks leaped off the bottom, after the market panic passed, and the economy did too. The first two quarters of recovery were unexpectedly strong. Now, however, various leading indicators point to slower growth later in the year and early next year. Not a return to recession but not a boom, either.
That suggests disappointment for stock-fund investors. Stocks won’t make much headway if the economy merely plods ahead. They could drift down or simply go nowhere for a while. Still, it’s futile to try to time the market. Assuming that you won’t touch this money for 10 or 15 years, continue your stock-fund investment program.
Here’s an interesting historical point to help keep you going. Stocks went nowhere from 1966 to 1983. The market rose and fell and rose and fell but never went much higher than 1,000 on the Dow or 100 on Standard & Poor’s 500-stock index. For those 17 zig-zagging years, index investors earned zero in stock price alone. If they reinvested their dividends, however, they earned a compounded average of 7 percent a year (measured by the S&P). During that same period, long-term bond investors earned 4.3 percent.
So long-term investing works, especially if you’re reinvesting dividends. Keep those IRAs and 401(k)s stuffed.
Tags: market timing, stock mutual funds, stocks
I recently inherited 11 preferred stocks in a taxable account(3 15%tax, 8 income tax rate) (6 past call date, 5 with call dates in 2011). Should I sell?
Also, does a Target Date fund work well for a taxable account (I plan to use that money in retirement)?
Thanks and I love your book!