The historic bull market that began in 2009 is in its 18th year, and it's showing no signs of slowing down. This golden age for investing has generated annual returns of 17% in the S&P 500 and 13% in the S&P/TSX Composite Index, including dividends. However, many Canadian investors are missing out on this opportunity. They park their savings in underperforming mutual funds with high fees, get spooked by market sell-offs, and trade too much, risking letting a generational investing opportunity pass them by. (Image: https://www.theglobeandmail.com/resizer/v2/CD46IHGWJRAXFCC7EOVZ7C5MIQ.JPG?auth=ca2e42db0de98f3ce51af93f35ed4f560a7dc8308a6ce7bdf27e9a72ff3a0b92&width=600&height=400&quality=80&focal=2347%2C804)
The retail investor experience over the long term has been "defined by missed opportunity," according to U.S. research firm Dalbar. The average American equity-fund investor sacrificed about a quarter of the returns the S&P 500 generated over the past decade. This highlights the importance of leaning in and participating in the bull market, even in the face of fear and uncertainty.
One way to participate in the market is to take an extreme passive approach and plow one's money into a major index fund, ignoring market noise. This approach, known as "VOO and chill," involves driving investment fees as close to zero as possible and capturing as much of the bull market as possible. However, few Canadian investors choose this route, with passively managed stock funds having a market share of just 23% in Canada.
Another challenge for investors is enduring sell-offs and market corrections. It's not fun watching money disappear, and it's easy to catastrophize during these moments. However, enduring these corrections when instincts are telling you to retreat is usually rewarded handsomely. Investors who succumb to panic then face the very difficult decision of when to get back in.
The key takeaway is that bull markets like these reward participation above all else. Record-highs are usually a good sign, and money invested at market peaks does just as well over the long term as money invested at any other time. Therefore, don't worry too much about being precise, and lean in to participate in this historic bull market.
