However, once this is done, the timing of market peaks and troughs no longer matters. For example, during the Great Financial Crisis, as a journalist, I spent an inordinate amount of time talking to so-called experts about when the stock market would rise or fall. Looking back, I think it was a waste of time.
Suppose you got the market cycle as wrong as possible, but still decided to become a long-term stock investor – and actually stuck with it despite colossal losses. This would have meant that you would have bought at the market high on October 9, 2007. By the spring of 2009, you would have lost most of your money, but you would have made it back and then some. According to FactSet, these are the S&P 500 returns from October 7, 2007 to January 18:
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Taking price into account alone, the index rose by 7.1 percent on an annual basis or 207 percent cumulatively.
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With dividends reinvested, the index rose 9.3 percent on an annual basis, or 325 percent cumulatively.
I will immediately admit that you could have done better if you had bought and sold at the “right time”.
This would have required knowing in real time when the market would rise and fall, and no one knows that reliably over long periods of time. You could also have bought and sold the right stocks. For example, if you only owned Apple and nothing else over the same period and never sold it, you would have had a total return of 3,760 percent. If you did that, bravo.
But which stock or stocks should you buy in the next 15 years and when is the optimal time to buy or sell? Some people will undoubtedly get the right answers.
I won't even try. This market peak means a lot to a lot of people. To me, it's just further confirmation of the wisdom of long-term, low-cost, buy-and-hold investing. Let's put this peak behind us and hope for many, many more.
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