Happy new year to all Zimbabwean investors and the world at large as we embark on 2025!
Last year, the S&P 500 dazzled with a 24% return, showcasing the US market's resilience and potential amidst global economic fluctuations.
As we look forward, caution is key; historical data shows that the S&P 500 rarely achieves positive gains for more than three consecutive years, illustrating market unpredictability.
Instead of trying to forecast short-term market movements, which even top US banks often get wrong, I suggest focusing on 'time in the market' over 'timing the market'.
My strategy involves dollar-cost averaging into ETFs that mirror the S&P 500, particularly when they dip to the 50-day moving average, to potentially lower the average cost of investment.
Remember, while the market has historically moved upwards about 78% of the time, it's the quality of companies within the index that drives long-term success.
However, investing always carries risks, emphasising the need for thorough due diligence. This includes understanding the sectors and companies that make up the S&P 500, diversifying your investments if possible, and assessing your risk tolerance against potential rewards.
Staying informed is crucial as market conditions can shift rapidly due to various external factors.
- Businessman locks horns with top judges
- Sunsleey Chamunorwa: Of journalism and reggae’s level vibes
- Renowned journalist Sunsleey Chamunorwa dies
- Student teachers want corporal punishment back
Keep Reading
Here's to a prosperous 2025, where informed, strategic investments pave the way for growth.
The S&P 500 in 2024: A retrospective
In 2024, the S&P 500 (SPX) delivered an impressive return of 24%, marking one of its standout years in recent history.
This performance was not only a testament to the resilience of the US market but also highlighted the growth potential that can be harnessed even amidst global economic uncertainties.
See the chart below which I got from Piranha Profits indicating historical returns of the SPX over the past.
What's enxt for 2025?
Looking forward to 2025, it's essential to approach market predictions with caution.
Historically, the S&P 500 has returned positive gains for more than 24% fewer times in three consecutive years. See chart below which I got from Piranha Profits. This rarity underscores the unpredictability of markets, even when they seem on an upward trajectory. However, I advocate against attempting to predict the market's short-term movements. Even major US banks with their extensive resources and top-tier analysts often miss the mark in their forecasts.
Investment strategy: Time in the market vs. timing the market
My approach for 2025 leans towards having 'time in the market' rather than trying to 'time the market' for my core positions that track the SPX.I wait patiently for high quality individual stocks that meet my investment criteria to drop at least 30% below my intrinsic valuation.
That means, I do valuations and estimate what I believe to be their valuations based on metrics such as cash flows, future outlook and other variables that can give me a picture of what they may be in the future.
These are still estimates using financial models. If you want insights into that kind of analysis, feel free to schedule a paid time session via www.streetwiseeconomics.com..
My philosophy is rooted in the understanding that while predicting market movements can be speculative, staying invested over the long term has proven to be more beneficial.
One strategy I recommend is dollar-cost averaging into core positions.
By investing a fixed amount into ETFs that track the S&P 500 at regular intervals, particularly when the market dips to the 50-day moving average, I can buy more shares at lower prices, potentially reducing the average cost per share over time.
This for me like I said, only works into stocks that I understand and with high quality metrics that I believe are important like I shared above.
The market's unpredictability in the short term is well-documented, with credible sources indicating that historically, the market has gone up about 78% of the time.
Yet, this statistic alone should not dictate investment decisions.
The quality of companies within the index plays a pivotal role in long-term gains.
The S&P 500, being a market-cap-weighted index, tends to include companies that outperform over time, as underperformers are often replaced.
*Isaac Jonas, a Canadian economist and consultant at Streetwise Economics, simplifies investing for everyone, offering practical guidance on navigating US and Canadian markets. His insights are shared through social media and his YouTube channel, Streetwise Economics. Please remember, his content is educational and not personalised advice. Investing carries risks, so consulting a financial advisor before decisions is advised. For tailored coaching on investing and trading, visit www.streetwiseeconomics.com or email isacjonasi@gmail.com to schedule a time slot for consultation.
