Is Long Term Investing Still Valid?

Does long term investing still work? Over the last few years there have been many ups and downs and this has lead some people to believe that long term investing is dead. So is it? Does investing into a diversified portfolio still work over the long term?

Well, all the evidence seems to suggest that it is still a valid way to make money. Just because there have been a lot of ups and downs in recent years doesn’t mean that it isn’t very profitable to hold stocks for the long term, say 20 years or more.

1. There Have Been Lots of Flat Times

People seems to be pretty eager to say something like, “we have been trending sideways for 5 years, looks like buy and hold is dead” Which if you look at the history of the stock market there have been plenty of times when stocks have been trending sideways for many years on end.

Only the people who hung onto their stocks and didn’t give up profited as the market continued its uptrend later on.

2. History is a Good Indicator

Over the long term the major indexes such as the Dow Jones and the S&P have gone up and they continue to go up. In fact, aside from buying at the top of the great depression if you would have invested into strong stocks and held them for 20 years during any point in the past it would have been profitable. History repeats itself more often than not.

3. Dividend Stocks

If you do take a look at the long term charts of the major indexes you still do not see the whole story. Many stocks also pay out a consistent cash flow to their investors in the form of dividends. These can make stocks a better investment than CDs and Bonds even in flat markets.

The stock market has been a pretty profitable way to make money over the long term in the past. But who knows what will happen in the future. In the end you always take risks by investing into stocks, but those risks would have worked out in the past.

For more on the Dow Jones Historical Closing Statistics and it’s returns or for more information on how the stock market has done over the long term visit this Stock Market Historical Graph page.