Is investing in the stock market still a way to make gains in the long term?
Posted by admin in Finance Friday, 9 December 2011 11:52 8 Comments
If I have a investment horizon of 10 years, after ten years, will I have made a lot of gains? What are your views as to investing in the stock market for the long term (over ten years)?
If you have ten years to invest, in a diversified portfolio, you could probably expect a gain of about 7 percent compounded annually, after inflation and taxes.
Investing in the stock market for 10 years is a bit of a gamble. Because if you look at recent stock market history, then you will see that the S&P 500 index was higher in 2000 than it is now.
Which means that if you had invested 11 years ago, then you would have a loss now and not a profit. And if you take inflation into account, then this loss is substantial.
But if you had invested 2 years ago, then you would have substantial profits now.
http://www.google.com/finance?q=INDEXSP%3A.INX&hl=en
It sort of depends on what you invest in. The past 10 years have been rather dismal. Not a lot of money was made. Hopefully, the next 10 years will be better. However, even during the last 10 years if you had invested in the right thing you would have made money. The annual return during the last 10 years of the average mutual fund investing in Chinese stocks was about 20% per year. That is not just one stock but an entire class of stocks. That probably might not be the case though for the next 10 years. The average annual return for Indian mutual funds was just about exactly the same for the past 10 years. Again that might not be the case during the next 10 years. Still, using that as an example if you had invested 10,000 in either 10 years ago today you would have about 62,000. Not all that bad.
I could site other examples of like rewards, but perhaps a few lesser cases are in order to put things into perspective.
The S&P 500 during the past 10 years has returned about 3% annually. The securities in that index account for something like 75% of the value of all US stocks traded in the US.
Stock market is always good for long term not short term period.
If you pick a good stock. Yes. If you pick a bad stock. No.
im still using the money to buy new ones that i made by selling certain stocks in 08/09 so yes its a great way…
The previous ten years is a very bad comparison because you are comparing the height of the internet bubble to the low level now while recovering from a crash and the worst recession in most peoples’ lifetimes.
And it depends on how you invest. Returns are near flat over that ten year period if you put all your money in 10 years ago and didn’t touch it.
But if you were dollar cost averaging by investing a set amount from your pay every month your return would not be bad because over the last ten years the market spent time lower than now. And don’t forget the power of compounded dividends. Most of those comparisons ignore that.
And I say you can’t buy and hold blindly. One needs to recognize a bubble and get out before the crash.
Good luck.
It can be..It usually is.. then again, if some of the great psychics are right, 2012 may actually be a heck of a year.
I so admire people who have the faith and patience to stay in the market long term like my Mom.. God rest her soul. Though I still hold some of her “widow and orphans” stock, and wish I held onto more, I just can’t get myself to have her kind of faith. And in these times, I believe she would be as steadfast as ever.. if she lived. However, some times I do believe that the unusual happens.. and as the financial world saying goes “past results don’t guarantee future performance”.