Historical Odds of Making Money in the Stock Market
With the US stock market hitting all-time highs, some investors are wondering if they’re doing the right thing with their portfolio.
It’s more important than ever to stick to your long-term investment time horizon and ride out expected market volatility.
What’s causing stock-market volatility?
I hate to blame the Federal Reserve (the Fed) once again, but the fact remains that high interest rates are weighing on companies, and in turn, on stock prices.
In addition, the Fed shared that they expect to keep rates steady (instead of lowering them) to continue their fight against inflation following the pandemic onset. High interest rates—while great for our savings accounts—make it more challenging and costly for companies to borrow money to fuel growth.
Finally, with interest rates at a historical high point, relative to recent years, bonds and high-yield savings accounts have become more attractive and have pulled attention away from stocks. In addition to bonds, investors have found other ways to make money in a rising interest-rate environment.
All that said, long-term investors have historically always come out ahead, and this time will be no different.
So, what’s the probability of making money in the stock market?
What’s the best thing to do?
Stay invested
Stay diversified
I know I sound like a broken record when I advise that the best thing you can do as a long-term investor is nothing at all, assuming you have built a diversified, low-cost and tax-efficient portfolio.
If you’re looking for extra credit points, you can consider tax-loss harvesting your taxable investments or doing Roth conversions before year end to take advantage of the recent market rollercoaster ride and save on your tax bill.
Do you have concerns about stock-market volatility? Reach out to me at Ben@coveplanning.com or schedule a free consultation call.
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Ben Smith is a fee-only financial advisor and CERTIFIED FINANCIAL PLANNER™ (CFP®) Professional with offices in Milwaukee, WI, Evanston, IL and Minneapolis, MN, serving clients virtually across the country. Cove Financial Planning provides comprehensive financial planning and investment management services to individuals and families, regardless of location, with a focus on Socially Responsible Investing (SRI).
Ben acts as a fiduciary for his clients. He does not sell financial products or take commissions. Simply put, he sits on your side of the table and always works in your best interest. Learn more how we can help you Do Well While Doing Good!
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Ben Smith, and all rights are reserved. Read the full Disclaimer.