Yesterday Dow Jones closed above 20,000 for first time. This is a historic milestone for stocks.
At my seminars people often ask me if stocks will continue this uptrend in the future or is it possible that this historic trend ends.
My answer: companies grow, they bring new value to the market, they innovate. So if nothing really catastrophic happens in the world you have nothing to worry about if you are a long-term investor. And if something catastrophic happens, then your investing portfolio will be the last thing on your mind.
Now, there are a lot of investing “experts” scaring people about the next market crash. Let me give you an example…
In the beginning of 2016, ‘Rich Dad’ author Robert Kiyosaki made a heavily shared and advertised prediction that in 2016 the world would see the worst stock market crash in history. He was dead wrong. Stocks all around the world made record highs in 2016.
Sorry Rich Dad, I just had to publish this. LOL.
But Robert Kiyosaki should have known better that predicting short term movements of the stocks. So why did he do it? In fact, why are thousands of investing “experts” making these kind of predictions?
The simple answer is: to get publicity and to sell more books.
Now, I have two simple rules about predictions:
Rule no. 1: When investing never trust predictions – even when they are made by famous gurus and heavily shared on social media.
Rule no. 2: If you can’t live without predictions, here is one of mine: I predict that everything is unpredictable.
Ok, now we settled that, so we can move to the next question. Will the market crash in the future?
The short answer is: “Market crashes are a fact”. There were a lot of them in the past and there will be a lot of them in the future.
There are a lot of sharp short-term ups and downs in the stock market, but in the long run they don’t really matter. Dow Jones 20,000 is now a fact. But will it ever hit 30,000 or 40,000? Probably, we just don’t know when. And will there be new crisis in the process? maybe Dow Jones 10,000?
Maybe. But in the history after every crisis, there was also a period of rising prices and always made new all-time highs after the crisis. For example, after the financial crisis of 2009 stocks needed just four years to pick up and make a new all-time high.
Now you are probably asking yourself if this trend will continue. The answer is that anything is possible, but I think that the probability of that trend to change is very low. Stocks will very likely continue to grow over the long run. It’s in their nature to do that. So the only losers are short-term investors who speculate. Or people selling in panic.
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