On Wall Street, the only guarantee is that there are virtually no guarantees. Direction of major stock indexes on Wall Street – Dow Jones Industrial Average (^DJI 0.13%), S&P500 (^GSPC 0.06%)and Nasdaq Composite (^IXIC 0.24%) — highly unpredictable in the short term.
Since the beginning of this decade, the Dow Jones, S&P 500, and Nasdaq Composite have vacillated between consecutive bear and bull markets. While it's fun to get perspective on historical correlations with various economic data points and dollar-based indicators, it's impossible to know with 100% accuracy which direction a major index will move next .
However, perspective changes everything. Although guessing what will happen in the next day, week, month, or year provides no guarantee to investors, certain investment strategies that rely on time have theoretically yielded positive returns. surelyfor over a century.
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History offers promise and danger: it's your choice.
For traders with a short-term mindset, history is not always on your side. For example, a downturn in the U.S. economy and stock market is inevitable. Since the end of World War II in 1945, there have been 12 recessions in the United States.
Similarly, the benchmark S&P 500 index has undergone double-digit corrections 40 times since the beginning of 1950, based on data from investment strategy firm Yardeni Research. This means that on average he will have a stock market adjustment every 1.85 years.
But history is two sides of the same coin, and it greatly favors investors who keep their eyes on the horizon. While recessions are certainly a normal and inevitable aspect of economic cycles, they are also short-lived. Of the 12 recessions since September 1945, only three have reached 12-month levels. Additionally, in none of these remaining three cases was he older than 18 months.
In comparison, most expansion phases last for multiple years. In fact, two growth periods eventually led to him reaching 10 years. Although Wall Street and the U.S. economy are not closely linked, economic growth often correlates with increased consumer and business spending and higher corporate profits.
It's a similar story when examining bull and bear markets on Wall Street. Although the S&P 500 has endured 40 corrections in the past 74 years, Finally (Keyword) I recovered my losses every time. Historically, double-digit recessions have been a buying opportunity for long-term investors, even though we don't know in advance when a recession will begin, how long it will last, or how deep the decline will ultimately be. shows quite conclusively.
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This investment strategy has consistently delivered results for investors since 1900.
But these data sets are really just a tease of what Wall Street would consider the closest thing to a guaranteed money-making investment strategy.
Each year, Crestmont Research analysts update an extensive data set that examines the benchmark S&P 500's 20-year total return, including dividends paid. S&P didn't exist until 1923, but Crestmont researchers were able to find its dataset. This allowed researchers to analyze his 20 years of total return data (1919 to 2023) for 105 separate periods.
I'm not trying to make you nervous about the outcome. 105 out of 105 20-year periods yielded positive total returns, with more than 50 of those periods yielding total returns between 9% and 17.1% annually. In theory, this has been a sure-fire money-making strategy since 1900.
You'll notice I said “on paper,” and there's a good reason for that. Investors can't invest their money in an index like the S&P 500 in the same way they can when buying shares in publicly traded companies.
It has been possible to reflect the performance of an index since 1993, when the first exchange-traded fund (ETF) SPDR S&P 500 ETF Trust (spy 0.04%), has been released. This index fund was created to closely mirror the performance of the S&P 500, giving investors an easy way to bet on the success of the U.S. economy and Wall Street.
The Crestmont data set shows that buying an S&P 500-linked fund and holding that position for 20 years has been a guaranteed money-making strategy for more than a century.
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Here's the smartest way to take advantage of this historically guaranteed money-making strategy
Long-term investors have a number of index funds to choose from that can track the S&P 500. His aforementioned SPDR S&P 500 ETF Trust has done an incredible job of making patient investors richer, with total returns including dividends approaching his 1,900%. 1993.
But what if we told you that there is an even smarter ETF that can deliver essentially the same returns while mirroring the stable long-term upward trend of the benchmark S&P 500?
Please say hello to Vanguard S&P 500 ETF (VOO 0.07%).
The Vanguard S&P 500 ETF and the SPDR S&P 500 ETF Trust are identical financial products in that they both own a basket of securities designed to reflect the performance of the S&P 500, excluding management fees. These fees, and more specifically the net expense ratio, serve as the main difference between these popular index funds.
The SPDR S&P 500 ETF Trust has a relatively low net expense ratio of 0.09%, while the Vanguard S&P 500 ETF has a net expense ratio of a truly microscopic 0.03%. This may not sound like a big deal, but for an investor who has put a lot of money into an S&P 500-linked fund, or who plans to keep the investment going for more than 20 years, 6 basis points ( This is a difference of $0.60). (You pay a fee for every $1,000 you invest) actually adds up, allowing you to keep more of your profits.
It all comes down to perspective and time. If you're willing to keep your eyes on the horizon, S&P 500-tracking ETFs like the Vanguard S&P 500 ETF offer a historically reliable way to grow your wealth.
