Recently, the S&P 500 Index's bull market became the second-longest and the second-best market in recent history. If you include reinvested dividends, stock prices are up 340 per cent from the low point after the financial crisis in 2009.
It's easy to think it's been easy money — you just put your chips on the table when the market hits the bottom and let them ride. You tend to forget that investing is actually pretty difficult, thanks to all the white noise and the daily headlines that try to keep you from following sound investment principals. Think about it, back in March 2009, you had just gone through the worse bear market, down 58 per cent from the peak in October 2007, since the Great Depression and were hearing lots of reasons why stock prices would go even lower.
Then, in 2010, there was the so-called flash crash; in 2011 the S&P 500 declined by 20 per cent. The gurus were convinced another recession was on the horizon, which, of course, never came about. Back in 2012, the markets were hitting all-time highs, which had some people concerned that the top of the market had arrived, but, since then the market has gained an additional 98 per cent.
In 2013, the big headline was rising interest rates, which surely would be the end of the bull market. It turns out, the experts were wrong again on this. The S&P 500 would go up by 32 per cent, its best year since 1997.
The U.S. dollar experienced strong growth in 2014, which surely meant it was another market high. Instead, the S&P 500 returned almost 14 per cent. 2015 started off the year with a sharp drop in oil prices and the first fed interest rate hike since 2006. The S&P 500 hit a 52-week low in January and February of 2016, but ended the year with a gain of 12 per cent.
Currently, we're hearing the bull market is running out of steam and is long in the tooth. Surely, new record highs mean there's nowhere to go but down. In other words, you're still exposed to the same noise in the form of extreme forecasts, groundless predictions, prophesies from yesterday's headlines that have bombarded us throughout the second longest market upturn in history.
This doesn't mean some of these dire predictions won't someday come true, there most certainly will be a bear market in our future and several more after that, but experience tells us that if you tune out the noise, you generally do much better and capture more of the returns the market has to offer instead of overreacting every time there's a scary headline.
Making money when the market is doing well is relatively easy. Avoiding large losses is the key to long-term successful investing.