But now it makes sense to invest in stocks, she asked.
I explained that I couldn’t give any advice on buying a particular stock and instead favored the kind of index fund she already owns. These funds eliminate the risk of owning the wrong particular stock at the wrong time. Index fund Tracking a wide range of markets has provided an easy and cheap way for ordinary investors to obtain overall returns on financial markets. John C. Bogle It became widely available in Vanguard in 1976.
But that may not seem like much, as the stock market has fallen sharply since the beginning of the year and bonds have also fallen. Despite occasional backlash, the S & P 500 is down nearly 18% annually. Bonds also lost money. My personal portfolio, including bonds and stocks, lost about 13 percent.
pain! I’m not happy about it.
But I accept that short-term market movements cannot be predicted.
Again, no one can do it consistently. Despite all the words written and spoken about the subject, they are not true knowledge.
Lessons from financial history
“Where is the market tomorrow going? I don’t know,” he said. Savina ResovaDimensional Fund Advisors, the head of research for asset management company, said in an interview Tuesday.
Dimensional isn’t trying to make short-term bets, she said. Nonetheless, she said finance suggests what is likely to happen in the market over the long term of 10 or 20 years or more.
“History has shown that stocks have higher expected returns than Treasury invoices and cash,” she said. Daily returns are unpredictable, so trying to get in and out of the market at the right time can miss the biggest day of the market. They can occur at any time, even for long downward periods.
dimension I saw S & P500 From January 1, 1990 to December 2020. After investing $ 1,000 in the index, we found that we got the following returns:
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$ 20,451 for a full investment All period.
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$ 18,329, an increase of 11.6% on October 13, 2008, if you missed the best day of these 31 years.
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$ 12,917 if you missed the best 5 days.
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If you miss the best 15 days, $ 7,080.
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If you missed the best 25 days, $ 4,376.
Based on these numbers, Mr. Resova said it makes sense to put money into the stock market as soon as possible. “You can miss an important day, and if you miss it, you miss a lot of benefits,” she said.
