Up and down stock markets like we've seen this year are tough on the concept of long-term buy and hold investing.
Persevere. Sticking with quality over the long term is a better way for most investors to build wealth than trying to guess their way through the puzzle of which sectors stock and funds to buy to suit market whims of the moment. Want an example? There's none better than Toronto-Dominion Bank. Its shares have performed quite well over the long term and, just as importantly, the bank has a made a handy calculator available to track long-term performance.
Over the 30 years to Oct. 31, a $1,000 investment in the S&P/TSX composite index total return index would have grown to almost $11,000. The same amount invested in TD stock would have given you shares worth about $17,800 and total cash dividends received of $6,735. Fees and commissions are not included in either example.
A commitment to long-term investing may well require you to accept horrible results for short periods. TD's had its moments for sure. If you invested $1,000 in the bank's shares during the early summer of 2007, your holding would have been worth about $600 at one point in spring 2009. With dividends of $55 or so factored in, the total return for that period would be been a loss of about one-third.
Even with that setback factored in, TD shares were a good investment for the 10 years to Oct. 31. The TD share calculator shows that a $1,000 investment would have been worth $1,927 at the end of that period, and you'd have had $502 in dividends as well. The same amount invested in the S&P/TSX composite index total return index would have given you $1,724.
The best approach to long-term investing is to use a dividend reinvestment plan, TD's calculator shows. With dividends reinvested, a $1,000 investment would be have been worth $49,461.
You can't base an investing plan on just one stock, of course. But a diversified portfolio of blue-dividend payers can carry you through a lot of short-term market drama on the way to long-term gains.
Rob Carrick