Investing for Your Long-Term Goals

Investing has been challenging recently, with a painful bear market for most of 2022 followed by a 7% rally in January that was mostly lost in February and March. While it's understandable to feel concerned or frustrated, it's important not to act impulsively. Even if there's more market volatility and a potential recession due to current economic headwinds, investing in stocks for long-term goals remains a smart strategy.

Fidelity's analysis shows that patience can pay off in the long run. A hypothetical $10,000 investment in the S&P 500 stock index made on Jan 1, 1980, and left untouched would have grown to $1.26 million by the end of 2022. However, if an investor had moved out of stocks and missed the five best days for the S&P 500 during that time, the investment would have only grown to $782,000.

This example shows that bear markets and recessions don't undermine success in the long run. Despite six bear markets and six recessions between 1980 and 2022, $10,000 still managed to grow to more than $1.2 million. Investing patience pays off, especially in the current reality where inflation is a concern.

Although inflation has come down from its sharp acceleration in 2022, it's unlikely to sink all the way to the 2% target that the Federal Reserve considers the sweet spot for economic health. Inflation is always a long-term threat to financial security, and stocks have proven to be the best way to earn inflation-beating gains in the long term. However, it's not wise to invest all of one's money in stocks. Having a portion of investments in stocks is a smart way to plan for the potential for rising living costs over time.