What investors should know
With U.S. President Donald Trump’s almost bipolar approach to domestic and foreign policy amid a drift to authoritarianism, investors in gold and bitcoin are demonstrating a belief that the U.S. dollar and American exceptionalism are simultaneously being undermined. Advisers globally, however, have the majority of their clients vastly underweight these assets in portfolios that remain highly exposed to stocks, and in particular, the S&P500 – an index whose sneeze causes everyone to catch a cold.
This article was first published in The Australian on 14 June 2025.
The argument is that over the long run, the S&P500 is ‘risk free’ – it always goes up. They admit there will be bouts of volatility and brief periods when the market declines, even precipitously, but as one extends the investment horizon, the frequency of negative experiences declines.
And they are right. The longer the time horizon, the more likely the returns will turn positive. Measured over all one year periods, the S&P 500 delivers a positive return about 67 per cent of the time. Over any three year period, the S&P500 delivers a positive return about 88 per cent of the time and over ten year periods, almost 100 per cent of periods are positive. It’s these statistics that support the old aphorism, ‘it’s time in the market, not timing the market, that matters’.
But I can tell you time is the friend only of a quality business. Stay invested over a long time in a rubbish business and your returns will turn worse not better. Time is the enemy of a poor-quality company. And the same is true of index returns. Time is a better friend of those who invest when others are fearful. Time is not such a great friend if you invest when everyone is greedy and optimistic. Put another way, you want to invest when the risk seems highest.
Let me explain.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
