Vitamin C: Part Two

Here’s a neat trick. Go to politicalcalculations.com.  You will see an entry form on the first page. Put in your birthday. The format is “year.month (YYYY.MM)” It will tell you the total return of the S&P 500 over your lifetime. We bet the answer surprises you.

You can also do this with any disaster. My favorite is the month before and after the October 1987 crash, because the return difference in the two start dates is pretty small. Think of the assumption here. We invest everything on October 1 of 1987 and then all of our investments go through the crash and we earn 10.33% as of May 2022. Or, we invest everything in November after the crash and the return is 10.78%. Not much difference for two remarkably timed investments. Most mutual funds expenses would double that cost. If this sounds familiar, we have recommended this site before.

Why does this matter? If you understand the preceding paragraph, it relieves you of the need to worry about the ups and downs. A consistent exposure to the market over long periods without regard to current events leads to a pretty good result regardless of when you start.

This is just more vitamin C on our investment philosophy.

The only way to capture investment return is to ride out the temporary declines, even when the drops are significant. Historically the S&P 500 falls about 14% every year and 30% every 5 years, on average. Peter Lynch said “The real key to making money in stocks is not to get scared out of them.” Amen to that.