Dumping money into an S&P 500
SPX, -5.18% index fund has been a good recipe for success during the bull market, but could you imagine an extended period of weakness for stocks?
If not, you have a short memory. According to research conducted by Timothy McIntosh, the author of “
The Snowball Effect: Using Dividend & Interest Reinvestment to Help You Retire on Time,” there were four very long bear markets for the Dow Jones Industrial Average from 1906 through 2011, almost 70% of the time period, as measured by the Dow Jones Industrial Average
DJIA, -6.30%.
“The movement toward passive is very good for active, for the long term. What the tipping point is, nobody knows. We’re not there, but the tipping point does exist,” Kaser said.
Consider the tendency of people to follow trends and fads. Then imagine headlines, 10 or 15 years from now, about money managers who have outperformed the market. It just might happen.
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