Browse through today’s personal financial and investment websites and blogs and you will find many articles and comments such as “Doesn’t matter what the market does now, I’m in it for the long run!”. While such is a good generic commentary for long term investing, eventually that “long run” will arrive!
Think about it: Today’s market conditions are someone else’s yesterday’s “long run”!
As of writing this Japan is starting its third “lost decade” of stock market performance. But you don’t have to go half way around the world for evidence. From the late 40’s thru the mid 70’s (give or take a few years) the Dow was pretty flat (not including reinvested dividends). The great market rise most contemporary investors have come to love and expect has only happened since the 1980’s.
No promises it will continue.
Being invested in quality businesses, with perhaps a little bit on the side in some more speculative endeavors seeking a little more growth opportunity , isn’t at all a bad idea. But sooner or later that future long term horizon will be at your front door. While time is your ally it is also you enemy because you simply cannot afford too many flat (or negative years) of returns no matter how long term your goals are.
At the same time however you can’t be over reactionary too. Markets do burp every so often. And there are always pundits claiming the next big drop is coming (and when the drop dose come there are even more pundits claiming credit for having predicted it years before!).
As with most investment planning it all comes down to how much risk the individual is willing to take. But don’t be lulled into a false sense of security believing that in the long run everything turns out fine. Your time frame and the “turn out fine” time frame may not overlap as smooth as you would like.
The events of life don’t always follow our personal convenience schedules.