Perhaps you’ve heard - Tiger Woods is back playing golf again. Having miraculously recovered from a horrific car accident little more than a year ago, the greatest golfer of all time (or second-greatest, if you’re a Jack Nicklaus person) is playing in this week’s Masters tournament. The last time he played was at the Covid-delayed November 2020 Masters, 17 months ago. That’s a long time. In investing terms, 17 months seems even longer. And therein lies the advantage of long-term investing.
The Market’s Tiger Timeline
Consider the following. Prior to this week, the last time Tiger Woods played in a golf tournament…
…the S&P 500 was at 3,557, or 20% lower than it is today…
…the Nasdaq was at 3,660, 16% lower than it is today…
…one Bitcoin was worth $18,370, less than half today’s $46,820 price...
…Nvidia (NVDA) traded at 130 a share; it’s now up to 236, a return of better than 81%...
…Apple (AAPL), whose downfall many analysts have been forecasting for years (much like Tiger Woods), traded at 117 per share; it’s now up to 170, a 45% gain…
…Microsoft (MSFT), written off for years after being surpassed by Apple, traded at 210 per share; it’s now up to 300, a 43% increase.
I could go on. But you get my point. A lot can change in just 17 months on Wall Street—and usually for the better. After all, the average annual return for the S&P 500 is 9.8%. So buying and holding stocks for five, 10, 15, 20 years is a good way to make money.
All of the stocks I just listed (plus Bitcoin) were household names 17 months ago—as well-known as Tiger Woods. They were a who’s who of tech investing then, as they are today. Granted, Microsoft had seemingly peaked years before, and Apple, Nvidia and Bitcoin all took it on the chin during the February/March 2020 Covid crash. But if you believed in the companies’ long-term trajectories—not to mention their strong histories of growth—those dips represented buying opportunities. And if you bought then and held on since, you’ve earned market-beating returns.
The Advantage of Long-Term Investing
Those opportunities can be difficult to spot. But the 17-month, 81% return in NVDA is one reason you should listen when we tell you a stock has a chance to be the next Netflix, the next Amazon or the next Apple. Check out Tim Lutts’ report on 10 Forever Stocks to Buy Now for long-term investing ideas that could double in the next 17 months, or triple or quadruple in the next five years. Tyler Laundon’s Cabot Small-Cap Confidential is another place to find stocks with high-growth potential; the average return of the 11 stocks in his portfolio is 64%!
Of course, not all stocks are up in the 17 months since Tiger Woods last played in a tournament. If you bought Zoom (ZM) 17 months ago on the heels of its early Covid boom, you’d have lost more than 73%. Peloton (PTON), Teladoc (TDOC) and Virgin Galactic (SPCE) are other examples of stocks that have fallen off of a cliff since November 2020.
But here’s the thing: you can limit the damage done by big losers like PTON, TDOC and SPCE by setting strict loss limits. We typically recommend pulling the plug if a stock falls 10% to 12%, or closer to 20% with small-cap stocks. That way, you can avoid any catastrophic, portfolio-crushing losses. In a long-term investing portfolio, those losses can look like blips.
Seventeen months qualifies as a long time. For those who are patient, a lot of good things can happen in 17 months. Market-beating returns. Double-digit returns. Or in Tiger Woods’ case, another comeback nobody saw coming.
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