This week the S&P 500 closed above 5,000 for the first time. Another milestone as we climb the ‘wall of worry’. Over the past 100+ years the S&P 500 has averaged capital gains of ~8.5% per year plus dividends of ~2.0%. That’s a total return of close to 10.5% (on average). If you compound 10.5% per year over 20 years (i.e., ‘CAGR’) – that’s a 637% increase. But as we know, the pathway is rarely smooth. Some years the market may “add 20%” and others it could give back a similar margin (or worse). And we saw this happen recently. However over the long run – markets will rise more often than they fall.
Investing Lessons
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Charlie: More than a Brilliant Investor
“The best thing a human being can do is to help another human being know more” – Charlie Munger. Very few things will change your trajectory in life (and/or business) as much as learning and education.The more you dedicate your time to obtaining knowledge – the better you will be. But take it a step further… the pathway your life takes will be a function of the decisions you make. Which begs the question – how does one make higher-quality decisions and/or fewer mistakes? Charlie Munger offered us a framework of mental models to do just that… this will be his real legacy.
The Folly of Forecasting
July 24 this year the S&P 500 traded around 4600. At the time, gains were almost 20% for the year. The bulls had all the momentum and analysts were ratcheting up their end of year forecasts. Some felt 20% YTD gains were not enough – calling for even greater upside. What happened? Stocks corrected around 10% offering investors a better opportunity. The game of near-term forecasting is a fool’s errand…