Over the last several weeks, the cicadas have been blessing our ears with their screeching, or white noise depending on your tolerance level of their mating call. This year is unique in that two broods of cicadas emerged at the same time – a 13- and 17-year brood – meaning these species’ eggs were laid 13 and 17 years ago, respectively, and after hatching, proceeded to hang out underground without doing much of anything besides feeding off sap from tree roots before making their grand debut this year.
Since we’re in Tennessee, we’ve primarily been dealing with the Great Southern Brood XIX, or the 13-year cicadas. Now, think about putting your life’s work underground for 13 years and simply waiting. That’s all it took for the cicadas and look at them now… they’re thriving. When they first emerged, I could hardly make it to my car in the morning without one flying at full speed into my face and screaming at me. They have completely taken over, outnumbering those of us in Nashville by more than 200,000 to one,[1] and I’d call that a success for the cicadas.
As a financial advisor, I can’t help but make a connection here to long-term investing. What would happen if you invested a sum of your money 13 years ago and didn’t pay any attention to it until today, like the cicadas and their eggs? Let’s look at the numbers using $100,000 as an example.
If you invested $100,000 in the S&P 500, [2] or America’s greatest companies, in May of 2011 and let it sit there without reacting to the market, you’d have about $496,951.67 in May of this year.
And what about the prior 13 years? If you invested $100,000 in the S&P 500 in May of 1998 and sat on it until May 2011, you’d have about $151,472.04 using the same criteria as above. While not quite the same result, as a patient investor, you would have seen your investment increase over 50% despite the two most severe stock market declines since 1950: the Dot-Com Bubble in 2000 (-49.10%) and the Great Recession in 2007 (-56.80%).
For fun, let’s look at the 17-year comparisons. If you invested $100,000 in the S&P 500 in May 2007, that investment would be about $481,107.22 by this May.
Going back to May 1990, an initial investment of $100,000 would have grown to about $609,995.80 by May 2007.
The cicadas allow their life’s work to sit underground for 13 to 17 years before their species can reap the benefits of waiting so patiently. They don’t (or can’t) react much to factors that are outside their control – the various ups and downs of the world – and yet they’ve existed on earth much longer than you and I have, maintaining their way of life that has proven successful for so long, no matter what.
Long-term investing isn’t too different. History speaks for itself. Stay the course.
– Mark Deering, CFP®
Senior Executive Vice President & Managing Partner, SageSpring
Sources:
[1] Cicadas plot their Music City comeback, Axios
[2] S&P 500 Historical Return Calculator, Of Dollars and Data
Any opinions are those of SageSpring and not necessarily those of Raymond James. This information is intended to be educational and is not tailored to the investment needs of any specific investor. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Past performance is not indicative of future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. You cannot invest directly in an index.
