Many of my friends are asking me whether now is the right time to sell their stocks. My friends don’t want to lose anymore money, but they also don’t want to miss out on gains. While I don’t believe anyone has any ideas of what will happen to the market in the short term, I usually turn my friends to the following three charts of the Dow Jones Industrial Average [1], Nasdaq [2] and S&P 500.
History of Dow Performance
History of Nasdaq Performance
History of S&P 500 Performance
Anyone can see that the long term performance of the general stock market is up. Sure, there are sharp drops at times. In fact, the Dow [1] dropped from roughly 350 down to 40 during the Great Depression but the Dow is at 200 times from that time!
So, we really shouldn’t sell our stocks as long as our time horizon is long or else we might miss out on the incredible jump that usually kicks off the next bull run.
The only caveat is that this theory is only valid for those of us that aren’t buying stocks on leverage [3]. If we are borrowing money to buy stocks, we are setting ourselves for trouble. Otherwise, we will be fine by holding onto securities [4] and reaping the rewards when times are good again.