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Investing With Confidence For the Long Term

Investing With Confidence For the Long Term

April 06, 2020
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Experiencing a major pullback in stocks is never a comfortable feeling. In times like these, we believe it can be helpful to set aside the daily headlines and keep perspective of how stocks have historically performed over the long term. After all, the majority of market participants are long-term investors, not day traders as the financial media would have its viewers believe.

Investors whose portfolios contain high-quality fixed income and equity positions have almost certainly seen their fixed income allocations benefit greatly in recent months, as their equity positions have suffered. Given the most recent market, equity allocations are likely below their portfolio targets and fixed income allocations are likely above their portfolio targets. We believe now may be an opportune moment for suitable investors to adjust those portfolio allocations back to their long-term targets and potentially capture benefits from rebalancing.

“The recent market volatility presents an opportunity for investors to assess their current portfolios in the context of their long-term plans,” said LPL Financial Senior Market Strategist Ryan Detrick. “For many investors with a long-term investment horizon, this means considering adding equities to true up allocations to their targets, and we believe investors with long-term horizons can do so with confidence.”

Short-term volatility comes in waves, but stocks have an extremely attractive track record over the long term. As shown in the LPL Chart of the Day, over all rolling periods since 1928, stocks have risen 76% of the time across a three-year horizon, and that percentage rises to 96% when zooming out over a 20-year horizon.  When starting from levels as depressed as the current market prices are, the risk/reward tradeoff is even more appealing.

View expanded chart.

All indexes are unmanaged and cannot be invested into directly.

While past performance is no guarantee of future results, we do view history as a helpful guide for future possibilities. We take comfort in the fact that the data sets are as positive as they are despite weathering such volatile periods as the Great Depression and the Financial Crisis.

 

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This Research material was prepared by LPL Financial, LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity. If your representative is located at a bank or credit union,  please note that the bank/credit union is not registered as a broker-dealer or investment advisor.  Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union.  Securities and insurance offered through LPL or its affiliates are: Not Insured by FDIC/NCUA or Any Other Government Agency. Not Bank/Credit Union Guaranteed. Not Bank/Credit Union Deposits or Obligations. May Lose Value. For Public Use – Tracking 1-978266