gmsc’s money tips #19:

You often hear that buying and holding for the long term in stock market investing is important. Buy why is it so important?

JLP drives the point home visually in the AllFinancialMatters post Why the Long-Run is so Important When Investing in Stocks.

Starting from 1926, and going up to 2006, we first see 1-year returns, some of which are up, and some of which are down, just as you would expect.

The changes are next given for 5-year returns (1926-1931, then 1927-1932, and so on), and there are startlingly fewer down times! If you think the difference there is amazing, wait until you see the 10- and 20-year return graphs!