S&P 500 performance between 2009 and 2013.[/caption]If you are following markets, the S&P 500 is on track for its best monthly performance since October 2011 and best Jaunary since 1997. Investors have poured in $55 billion in January into the stock market, the biggest monthly inflow on record. If you had been sitting on the sidelines and were waiting for the perfect time to get in, you have probably missed the upswing. This is one reason why I do NOT advocate market timing on this blog.
The S&P 500 closed lowest on March 6, 2009 at 638 points. Almost a year and a quarter later, it closed at 1077 points gaining 68% from the lowest point. Fast forward to 2013, it closed at 1501 points on Jaunary 30, 2013 gaining 135% (i.e. more than doubling from it lowest point).
This is why I advocate Buy and Hold investing. When times are tough, the tendency for most people is to become risk averse or to pull out of the market. But, that is exactly where many people make mistakes. When market goes down, it is actually a good time to buy the market because you can buy more with a lot less money. It is like finding stuff on a clearance sale.
If you had stayed invested during the recession and had been adding to your investments on a regular basis, you would have seen some of these gains. The key is to stay diversified and invest consistently in your holdings on a regular basis. This is not 'sexy', but will make you rich.
Happy Buy & Hold-ing!
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