Gil’s Musings

Why Long Term Investing Pays Off

Hopefully you’re not tired of reading my blog posts about why long term investing pays off and why short term events are irrelevant. Surely they are not irrelevant to your emotion. If you listen to that emotion, you will make grave errors in judgment. Just remember a few important facts. Dark days of investing are historically joined at the hip to fantastic bright days. If you liquidate to “wait and see,” you will be blinded by the light of what you missed. Yesterday was one of those days. The stock market was up 11% in one day, its best single day of performance since the Great Depression 87 years ago. Note that the other better day was nestled up to the side of very dark times also.

Bank of America recently released a study that shows that since 1930, there have been 10 days per decade that defined performance. If you missed those days, performance got wrecked. How bad is the math? Over those 90 years, missing those 90 days reduced performance to just 1% per year, or 91% in total, to be specific. If you managed to stay invested over the entire time, your compounded return was 14,962%. Said another way, missing those 90 days over 90 years meant the difference between a simple doubling of your money, or 150 times your money. Stay invested!

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