Double-digit gains for the S&P 500?
Ramsey is a huge proponent of investing in low-cost S&P 500 index funds and letting that money compound and grow.
The S&P 500 — a strong measure for the U.S. stock market as a whole — enjoyed a stellar 26.06% annual return in 2023 — and the market has started 2024 by edging closer to record highs.
According to the investment firm Ned Davis Research (NDR), years in which the S&P 500 hits at least one record high typically coincide with a median annual gain for the index of around 15%.
“Well … DUH!” Ramsey said. “Obviously, if the stock market is hitting new records, you ought to be getting great returns. It is a valid statistical correlation.”
The NDR researchers said the data highlights two typical characteristics of the stock market: that strength leads to more strength, and that stocks don't typically dive from all-time highs.
If you need more proof of stable returns before investing your money in the S&P 500, Ramsey suggested doing this: “You can pull up the historical data and look at the track records, look at the trend lines — it’s really not hard to understand.”
But if it’s too overwhelming, consider working with a financial adviser who can walk you through the basics and help you make investment decisions that have the best chance of meeting your financial goals.
“All this to say: we’re close to hitting a new record — ever, in the history of the stock market,” Ramsey said. “And if it hits that, that is a great indicator that ‘24 is going to be a great year to have invested.”
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Stop trying to ‘time the market’
When retail investors try to time the market, it usually doesn’t end well — unless you’re blessed with otherworldly foresight.
That’s because the stock market is extremely complex and it reacts to countless variables, such as economic growth, interest rates, political events, natural disasters, consumer sentiment, corporate earnings, and so on.
And investors are often driven by emotions. How you react to one just piece of good or bad news can have a huge impact on the success of your investment portfolio. It’s easy to hit ‘sell’ when things are looking down — but have you analyzed the long-term trends and considered how things may tick up in the future?
“If you’ve got some money you’re sitting on, I would buy your mutual funds … right now,” Ramsey said, a strong support of the buy-and-hold strategy. He told investors to expect their holdings to go up and down because “that’s how life works [and] it’s how the stock market works.”
His Ramsey Show co-host, George Kamel, chimed in with the following advice: “If you’re thinking about pulling all your money out because you saw some headlines, don’t do that either. We’ve found that if you just ride this roller coaster over time, you’re going to hit a new record high and a new record high.”
To illustrate this point, Ramsey gave the example of sitting on $100,000 in cash savings, rather than investing that money into the S&P 500. If the market jumps 15% in a year, like the NDR study suggests, you’d lose out on $15,000 if you chose not to invest — a big penalty for resting on your laurels.
The same goes for real estate
Beyond traditional stock and bond investments, Ramsey’s ‘get to it’ advice also extends to real estate — and his comments hit home for first-time homebuyers and for investors looking for ways to diversify their portfolios with real estate.
“Is real estate going to go down? No [because] we have a tremendous shortage of housing,” he said.
Housing supply in the U.S. has failed to keep pace with population growth and demand in recent years. This is partly due to a decline in new construction and the lingering effects of pandemic-driven delays and economic challenges. The limited housing inventory has kept house prices artificially high — and Ramsey doesn’t see those prices easing up any time soon.
“If you wait a year to buy a house because you’re somehow waiting to time the market — you’ve got this mysterious insight that you think things [prices] are going to go down — you’re wrong,” Ramsey said.
He warns investors will “miss” out on an opportunity if they wait a year to invest in real estate, but adds: “If I’m wrong, give it another 12 months and I won’t be wrong.”
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