We do not have, never have had, and never will have an opinion about where the stock market, interest rates or business activity will be a year from now.
—Warren E. Buffett, the world’s most admired, least imitated investor, in his annual letter to shareholders 30 years ago this month, dated February 28, 1989
- On February 28, 1989, the Standard & Poor’s 500-Stock Index closed at 288.26. On December 31, 2018 it closed at 2,507, fairly close to nine times where it was on the day of Buffett’s letter. Of course, this ignores dividends.
- The cash dividend of the S&P 500 for the full year 1989 was $11.73. For the full year 2018, it was $53.61, a bit more than four and a half times where it was in 1989.
- To get a sense of how these increases compare to inflation, note that the Consumer Price Index stood at 122 in February 1989. In December 2018 it was 253, having slightly more than doubled in the interim.
When will we ever learn?
It was never about “timing the market.” It is always about TIME IN THE MARKET.
The time frame of 30 years is an appropriate time horizon to review as the average retirement duration of a couple retiring at age 65 will likely last for three decades. Make sure your actions reflect that reality.
Dimensional co-founder David Booth adds:
Every year they say it’s going to be a stock picker’s market; you’ve going to have to be selective. For the 37 years we’ve been in business it’s never turned out to be the case.
“The Moving Finger writes; and, having writ,
Moves on: nor all thy Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all thy Tears wash out a Word of it.”
Hope you have a great week!
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