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Investments – How long is long-term exactly?

In a recent Moneyweb article, Patrick Cairns discusses the question: How long is long term, exactly?

“Many investors might consider five years a good period of time to dedicate to a particular strategy. The highest risk funds tend to have a recommended holding period of ‘at least five years’, thus implying that this is what constitutes ‘long term’.”

Cairns however points out that a serious analysis of markets would indicate that five years are actually still quite a short period. To illustrate this point he shares a video compiled by Corion Capital that demonstrates that a long-term view of the stock market is at least 10 years, and ideally 25.

He further turns to history and shares that anyone who had invested in the all share index (ALSI) in 1969 would have had to wait 10 years before their return climbed above inflation. This was the deepest and most protracted period of weakness in the local market over the past 50 years. “The result of this rebound was that, even though an investor who started in 1969 would have seen a return consistently below inflation to the end of 1978, by the end of 1980 their return would be greater than inflation plus 5%,” he reveals.

“Over five years, and even 10 years, the stock market can go against you. If you give it long enough, however, it has always delivered genuine growth,” Cairns concludes.

Click here to read the Moneyweb article.

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