No, not the Prince song. But Jamie “I’m the smartest guy in the room” Dimon and some pearls of wisdom.
In a year? In 10 Years? In 25 Years? Of course, it’s a rhetorical question because it’s impossible to predict. Market analysts are fond of showing where stocks and bonds have been to indicate where they are likely to go in the future but with the caveat, “Past performance is not indicative of future results.” Comforting, isn’t it?
Everyone is prone to making emotional decisions. It’s really easy to get caught up in a buying frenzy for Fear of Missing Out (FOMO) and equally as easy to panic sell when the markets are in freefall. Trying to time the market has a real cost though. Bank of America showed the impact of missing the 10 best and worst days in the S&P 500 dating back to 1930.
Timing the market is difficult at the best of times for even the most experienced traders. Looking back at the data since 1930, if you missed the 10 best days each decade, the total return was pegged at 28% whereas if you had remained invested through the cyclicality of the market’s ebbs and flows, your portfolio returned a handsome 17,715%.
So, back to the question, when will the S&P 500 Index hit 6,716.96 and why am I asking? Today, the S&P opened at 4,198.10. When the index crosses 6,700 that approximates a 60% increase from where it sits today. How long will that take?
A diversified portfolio of Senior Life Settlements with a 60%+ Yield-to-Maturity is the same return. The only differences are that you know the spread between your cost basis and the face amount in advance and it can’t fall below that. The time to maturity and time for the S&P 500 to hit 6,700 are equally unknown. But buying and holding a portfolio of life settlements could mean you’re taking a down decade off the table.
