The Life and Death of Long-Term Investing

Take a look at this chart of the S&P 500. It might give you valuable perspective. Despite dangerous near-term prospects, I believe you still can make a ton of money investing in the stock market.

Start with the years 1971-1972...


See how the S&P was rising then? Well, right now, it's like late '71 or mid '72. So, there's more upside to go here in '07.

In fact, you might be surprised by how much! You might even start thinking I am an idiot, too, because I am always expressing such caution...

But then again... look what's dead ahead: 1973-1974. This was a disaster. Half of the S&P's value ... lost.

Look how long it took before this loss was fully recovered, too. Plus, it wasn't until 1982 that things really got back on track. Almost ten years ... going nowhere!

Let me remind you (as I remind myself):

We only live so long.

Now, imagine...

What if sometime during the next five years the S&P 500 falls back to its 1994 levels, below 500?

Do you doubt this possibility? There are plenty of reasons to suppose this could happen!

Imagine all the weeping and gnashing of teeth ... with much talk about impending doom accompanying financial misery.

But look at this longer view...


The S&P 500 would remain in a rising, long-term trend even if, tomorrow, it collapsed to 475!

Do you see this? (475 is where the S&P 500 bottomed in 1994.)

Now imagine... if this happens, many years probably will pass before the S&P 500's present level is exceeded.

This is the reason why those who promote long-term investing stand as potentially dangerous advisers. They typically fail to mention that, sometimes, the "long-term" does not match up well with one's time on earth.

Is it premature to advise your caution here, then?

Maybe so.

However, in the grand scheme of things — given how far the stock market has risen and where it could go from here — your caution might prove rather timely.

I only hope to impress you with two simple facts...

1. You don't need to be a Chicken Little doom-and-gloomer to concern yourself with bad things that happen quite naturally in the stock market.
2. "Better Safe Than Sorry" is an investment mantra whose profit potential is very much worth your consideration, now and forever.
   

You simply must appreciate the difference between realistic dreams and outright fantasy if you wish to turn your 401(k) into a bulging treasure chest. Truly, you alone hold the key.