Remember the long-term trends of owning great global companies.
What can you and other investors do about Russia, China, volatile energy costs or whatever tomorrow’s headlines bring? How does the Ukraine crisis affect your providing income for you and your family for the rest of your lives? The answer – in this age of rat-ta-tat information about disasters – fixes your whole mindset about investing.
Simply, your task when picking investments differs from the media’s job when telling you news. The media must focus on details of the immediate and try to extrapolate meaning to every move that makes news. Investors like you then hear never-ending predictions about oil spills in the Gulf of Mexico, bird flu epidemics in Asia and seemingly endless instability in the Middle East.
Own Great Global Companies
To counter the 24/7 news cycle, we as investors constantly remind ourselves of long-term trends in owning stock of the great global companies. Most importantly, you need not predict how these headline events turn out. You just keep faith that most companies affected will take necessary actions to remain profitable over time.
Often, a lot more time than a few days of ceaseless news. For example, consider taking a look at how the largest U.S. companies did over the last 30 years as shown on the S&P 500. Use the 30-year span because it approximates the retirement duration that most couples consider.
In addition, the S&P includes the 500 leading companies in the most important industries for the U.S. economy and captures approximately 70% to 75% of the total value of the U.S. stock market.
You would begin this review 30 years ago (1992) and then you might look at 15 years ago (2007) before looking at the present and the future. What happened over those time frames?
We had the two of the worst stock market declines since World War II: the technology bubble collapse in 2000 and the economic calamity of 2008. We had the COVID-induced bear market. But we also had one of the longest-running, 10+ year, bull markets in history.
U.S. Markets Over 15- and 30-Years
As the summer of 2022 comes to a close, many investors are reeling with performance so far this year. And for good reason as the major U.S. equity markets are all down more than 10%, with NASDAQ off more than 20%.
But look at 2022’s decline in the context of longer time frames. Such growth numbers surprise most people, especially those who pay attention to the news. The surprise stems from the incessant negativity that surrounds daily happenings worldwide without understanding the incredible power that capitalism has to adapt.
For investors facing 30 years or more of retirement, owning large U.S. companies (as well as some of the other thousands of publicly traded companies throughout the world) benefits and fosters growth.
Remembering that – and keeping a cool head and steady course when global messes force the market down – can help you work towards your financial goals.
Let the media worry about obsessing over the next world crisis. Your task is more local.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Past performance is no guarantee of future results.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ-100 is composed of the 100 largest domestic and international non-financial securities listed on The Nasdaq Stock Market. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology, but does not contain securities of financial companies.
This article was prepared by FMeX.
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