Wealth management and financial planning; for individuals and businesses.
Wealth management and financial planning; for individuals and businesses.
Why Long-Term Investing Works: A Time-Tested Strategy for Stock Market Success
Jan 17, 2024
Spend Time Growing Your Assets
In today's world, the secret to increasing your wealth isn't about following the newest trends but sticking to a tried-and-true method: investing for the long run. Despite the stock market's ups and downs, it's important to remember that growing your money takes time. It's more about how long you stay invested, not about picking the perfect moment to invest.
The Case for Long-Term Investing
1. High Return Potential of Emerging Market Indices:
Emerging market indices, known for their high return potential, offer compelling evidence for the long-term investing approach. Take, for instance, the Nasdaq 100 Index, which includes 100 of the largest and most innovative non-financial companies listed on the Nasdaq Stock Market. Between December 31, 2007, and June 28, 2019, this index boasted an average annualized return of about 13%. While it's true that such indices may exhibit higher risk and volatility, their growth potential over time is undeniable.
2. The Stability of the S&P 500:
The S&P 500, representing 500 leading U.S. companies and covering approximately 80% of the market capitalization, is often seen as the best single gauge of large-cap U.S. equities. During the same period, it averaged a 9% annualized return, albeit with less volatility than the Nasdaq 100. This stability and consistent growth underscore the benefits of long-term investing in well-established indices.
3. Avoiding Emotional Trading:
One of the most significant advantages of long-term investing is the ability to sidestep emotional trading, which often undermines investor returns. Historical setbacks, including the Great Depression, Black Monday, the tech bubble, and the financial crisis, have all demonstrated that investors who stayed the course with their investments in major indices like the S&P 500 or Nasdaq 100 ultimately realized gains. This resilience through market highs and lows highlights the strength of a long-term investment strategy.
Making the Most of Your Investing Years
Long-term investing is not merely a strategy but a philosophy that emphasizes patience, perseverance, and a forward-looking perspective. It's about recognizing that while markets may fluctuate, the trajectory of well-chosen investments is upward over time. For business owners and individual investors alike, adopting a long-term outlook can significantly impact the growth of your investment portfolio.
If you're contemplating your investment strategy or seeking to optimize your portfolio for the long haul, reaching out for professional guidance can be invaluable. Whether it's understanding the nuances of different market indices or crafting a diversified investment plan that aligns with your goals, a conversation with a financial advisor can provide clarity and direction.
Final Thoughts
Investing for the long term is a proven path to financial success in the stock market. It allows investors to benefit from the growth potential of indices like the Nasdaq 100 and the S&P 500 while minimizing the impact of volatility and emotional decision-making. As you navigate your investing journey, remember that the most significant returns come from patience and persistence, not from attempting to outguess the market.
* The information contained in this material is for general information only and are those of the author, and not a recommendation or solicitation to buy or sell investment products. This material was developed and produced by Levitate which is not affiliated with the named broker-dealer. For a comprehensive review of your personal situation, always consult with a tax or legal advisor.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.
S&P 500 - A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
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In the world of financial management, experienced advice is invaluable. Jay Conner, a prominent investment adviser at Meritrust Wealth Management, stands out with 22 years in financial advising and 18 years in his current role. His expertise is highlighted in a recent profile that sheds light on his approach to investing and retirement planning. Here's quick look - Common Mistakes in Investing Jay Conner points out that many investors fall into the trap of being influenced by financial and social media when making investment decisions. He advises individuals to focus on their personal goals, needs, and wants rather than comparing themselves to others. This inward focus helps tailor financial plans that are truly beneficial on an individual level. Planning for Retirement When it comes to retirement planning, Conner stresses the importance of understanding one's own goals and desires. Retirement savers should begin the complex process of quantifying their needs and wants for their post-work years. This understanding guides how much they need to save and how to strategically invest their retirement funds. Investment Strategy Post-2023 Market Gains Following significant gains across all major U.S. markets in 2023, Conner recommends that long-term investors stay their course with a well-thought-out plan tailored to their retirement needs. Historical data supports this approach, as the S&P 500 tends to rise following all-time highs. Career Inspiration and Personal Insights Conner's passion for financial advising was inspired by childhood memories of discussions about stocks and the economy with his family. His career is driven by a continuous desire to learn and adapt to the unique financial situations of different individuals. Outside of his professional life, Conner is actively involved in volunteering at his children’s school and with local nonprofits, demonstrating his commitment to community service. Investing a Hypothetical $1 Million On a lighter note, if faced with the decision to invest $1 million in one company, Conner would choose Amazon due to its vast array of offerings and essential web services. However, he clarifies that investing such a large sum in a single stock isn't a prudent strategy. Dream Retirement Looking ahead, Conner envisions a retirement that allows him to continue helping others with their investments. He also dreams of being a golf course ranger in a warmer climate during the winter months, sharing and creating stories like those he has admired in others. Jay Conner’s insights offer a thoughtful blend of personal and professional wisdom, reflecting a deep understanding of investment strategies tailored to individual needs. For more in-depth knowledge and detailed guidance from Jay, you can read the full article here .
At Meritrust Wealth Management, we are constantly keeping an eye on legislative changes that can impact your financial planning. One of the notable changes introduced by the 2022 SECURE Act 2.0, which takes effect in 2024, is the ability to roll over funds from a 529 plan into a Roth IRA. This is a significant update for anyone involved in educational savings plans, including parents, grandparents, and other family members. Understanding the New 529 to Roth IRA Transfer The new legislation allows beneficiaries of 529 plans to transfer up to $35,000 to Roth IRAs during their lifetime. However, this rollover is bound by the Roth IRA’s annual contribution limits, which can affect how much can be transferred each year. Additionally, for a 529 account to be eligible for this rollover, it must be more than 15 years old. It's important to note that if the account's beneficiary is changed, the 15-year clock for eligibility resets. This option provides a unique opportunity for those beneficiaries who do not utilize the full amount of their 529 for educational expenses. Instead of the funds sitting idle or being subjected to non-qualified withdrawal penalties, they can now potentially be used to kickstart a child’s retirement savings. Strategic Considerations For families with multiple children, the common practice of transferring leftover funds from one child’s 529 plan to another can still be a viable strategy to ensure the efficient use of college savings. However, with the new rollover option, it may be advantageous to consider allowing children who have surplus 529 funds to convert these into Roth IRA contributions instead. This shift can help in fostering early financial independence and support other long-term financial goals. But, this strategy requires careful planning. For example, if a child has completed their education and there is a remaining balance in their 529 plan, instead of renaming the beneficiary to allow another child to use these funds, you might consider requesting a rollover to the other child's existing 529 account. This maneuver keeps the original account intact, preserving the 15-year requirement and enabling future transfers between siblings if needed—though this can only be done once every 12 months. Navigating Complexity We understand that these changes can be complex and may bring up several questions about the best strategies for your family’s financial planning. Each family’s situation is unique, and the right approach depends on numerous factors including the number of children, the amounts saved, and long-term financial goals. Meritrust Wealth Management is here to help you navigate these new options. If you have any questions about how the new 529 to Roth IRA transfer might impact your financial planning, or if you need assistance with any other financial planning or investment strategies, do not hesitate to reach out. You can contact us for further information or to schedule a consultation. Your financial well-being and peace of mind are our top priorities.
Disclosure
Securities offered through Kestra Investment Services, LLC, (Kestra IS) member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC, (KestraAS). Kestra IS and Kestra AS are affiliated entities. Kestra IS and Kestra AS are not affiliated with Meritrust Wealth Management. Investor Disclosures https://bit.ly/KF-Disclosures.
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