How to deal with the S&P 500 that continues to set new highs | Hatch's musings on Wall Street | Moneyクリ Monex Securities' investment information and media useful for money

The S&P 500 stock price index (hereinafter referred to as "S&P 500") is reaching new highs.

As the market rises to this point, a certain number of investors begin to think, "It probably won't rise much more now," or "Let's sell for now and buy back when it drops." This mindset is understandable, and the idea of "selling high and buying low" appears rational at first glance.

However, looking back at the history of investment, it is often found that this approach does not work well.

There is interesting data. According to a survey by Hartford Funds, from 1992 to the end of 2021, the annual average return of the S&P 500 was 10.92%, while the return for the average individual investor in the United States was only 10.05%.

Despite the fact that the returns from U.S. stocks are significantly higher than those of Japanese stocks, why are American investors unable to fully enjoy those benefits?

This is because many investors repeat the behavior of selling when they think prices are likely to fall and buying when they think prices are likely to rise. With each transaction, they misjudge the timing and end up cutting their returns as a result. There are even suggestions that investors who aim for perfect timing tend to miss out on long-term profit opportunities.

Excessive trading cuts into the returns that the market is supposed to provide to investors themselves.

So, what should we do?

What I always emphasize is "Stay Invested." I am not very optimistic about the Japanese stock market, so I do not intend to say the same about domestic stocks.

However, if you are looking to invest in the U.S. market, which offers attractive long-term returns, particularly in representative stock indices like the S&P 500, I believe that the idea of "Stay Invested" makes a lot of sense.

Rather than measuring timing, entrusting time to the market (Time in Market) is the most important factor in asset building through U.S. stock investment.

What is needed for that is the ability to endure emotions and noise.

To continue investing calmly according to a predetermined policy, without being swayed by sudden market declines or panic-inducing reports. This has been the royal road to success in U.S. stock investing. I believe that this principle will remain unchanged.