Does Long Term Investing Work?
March 9, 2010 | 
Author Over the last few years the market has been up and down, but overall it seems to have done very little. So, does buy and hold still work? Does buying into a diversified group of stocks still benefit you in any way?
The answer is yes. Or at least there is no evidence to suggest that it doesn’t. In fact all the evidence seems to still suggest that buying stock in a strong company and holding onto it for the long term is still a great way to invest, and here is why.
1. There Have Been Lots of Flat Times
Everyone wants to believe that if something happens in the market in the last 3 or 4 years that it predicts what will happen to the market in the next 20 years. No, there have been lots of times when the market has been trending sideways for years only to break out of it and start going up again.
The investors who made money during sideways trends where those who simply looked for good investments and hung onto them until the market finally broke out of its sideways trend and went up.
2. History is a Good Indicator
Aside from buying at the top of the great depression, there was no other time where you could have bought stocks, hold them for 20 years, and not have a decent overall return. Even if you bought at the top right before the great depression you could have still made money if you had held onto it long enough.
3. Dividends
If you do take a look at the long term chart of the major indexes you are still not seeing the whole story. They also paid out dividends. These dividends alone can make them better investments then other similar securities like bonds or CDs.
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 Industrial Average History and it’s returns or for more information on how the stock market has done over the long term visit this Stock Market History page.