Motley Fool advises holding quality stocks to weather market volatility
The Motley Fool reports that its author is not concerned about a potential stock market crash because the strategy involves holding quality stocks for the long term. The outlet states that the S&P 500 has risen for three years, heading for a 100% gain over that period, driven largely by artificial intelligence and growth stocks. While some investors worry about a crash due to economic uncertainty and high valuations, the author argues that crashes are a normal part of the investing cycle, citing historical events such as the 1929 crash and the 2020 coronavirus crash. The article notes that the S&P 500 Shiller CAPE ratio has reached a high level, indicating that stocks are expensive, and that peaks in this measure have historically preceded declines. However, the author maintains that quality companies with financial strength and competitive advantages can recover after downturns. To illustrate this, the piece cites data from iShares by BlackRock showing that an investment in U.S. stocks at the peak before the 2007 global financial crisis resulted in a 40% decline after one year but a 109% increase after ten years. The author recommends two specific actions for investors: holding onto stocks they believe in despite short-term declines and using market dips to buy quality stocks at lower prices. The article concludes that these techniques allow investors to beat market crashes and avoid worrying about the next downturn. The S&P 500 performance data is attributed to YCharts, and the Shiller CAPE Ratio data is also sourced from YCharts. The author specifically mentions owning Amazon and Vertex Pharmaceuticals as examples of quality stocks held for the long term, noting that they are not planned to be sold soon. The piece emphasizes that even if these stocks decline during difficult times, they are likely to recover if held for several years.
The Motley Fool reports that its author is not concerned about a potential stock market crash because the strategy involves holding quality stocks for the long term. The outlet states that the S&P 500 has risen for three years, heading for a 100% gain over that period, driven largely by artificial intelligence and growth stocks. While some investors worry about a crash due to economic uncertainty and high valuations, the author argues that crashes are a normal part of the investing cycle, citing historical events such as the 1929 crash and the 2020 coronavirus crash. The article notes that the S&P 500 Shiller CAPE ratio has reached a high level, indicating that stocks are expensive, and that peaks in this measure have historically preceded declines. However, the author maintains that quality companies with financial strength and competitive advantages can recover after downturns. To illustrate this, the piece cites data from iShares by BlackRock showing that an investment in U.S. stocks at the peak before the 2007 global financial crisis resulted in a 40% decline after one year but a 109% increase after ten years. The author recommends two specific actions for investors: holding onto stocks they believe in despite short-term declines and using market dips to buy quality stocks at lower prices. The article concludes that these techniques allow investors to beat market crashes and avoid worrying about the next downturn. The S&P 500 performance data is attributed to YCharts, and the Shiller CAPE Ratio data is also sourced from YCharts. The author specifically mentions owning Amazon and Vertex Pharmaceuticals as examples of quality stocks held for the long term, noting that they are not planned to be sold soon. The piece emphasizes that even if these stocks decline during difficult times, they are likely to recover if held for several years.