It’s tough to keep a long-term investment mindset when the S&P 500 has gone nowhere over the past decade. At least ETFs have made it simple for investors to keep their money working in a fund for the long term, with minimal cost.
“Markets are becoming more volatile and have moved almost sideways over the last ten years. We are presently below the all-time peak for the S&P500 of 1565.15 set on October 9th 2007. For long-term investors, there is no clear trend. The question is therefore, ‘Has buy and hold become an obsolete investment thesis?,'”Jeremy Robson for Seeking Alpha asks.
It is impossible to forecast market returns, however, predictability increases the longer the time frame is. Andres Cardinal for The Motley Fool explains that average historical returns are easier to predict in a 10 year time period, versus over 5 years. Therefore, outperforming the S&P 500 Index with a proxy such as the SPDR S&P 500 (NYSEArca: SPY) can be easier to do over a longer time frame, minus inflation. [Surveying S&P 500 Equity ETFs]
And outperforming the broad market barometer such as the S&P 500 can be done with various other ETFs, plus diversification benefits. For instance, the PowerShares QQQ Trust (NasdaqGM: QQQ) gives investors exposure to high quality, high growth companies which can add value to a portfolio. [Some of S&P’s Favorite Equity ETFs]
Investing in emerging markets is another strategy for long term outperformance. Higher economic growth, and stronger fiscal positions than those in the U.S. can provide returns within a long term strategy.
Outperforming the market can be done if an investor takes the time to piece together a diversified, well-balanced portfolio. This may mean taking the extra time to look at the holdings of an ETF and rather than single stock picking, choosing the right ETFs to avoid over-exposure to a certain sector or company. [Investors Moved Back into Stock ETFs in July]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.