Can the stock market make me rich even now?

Here are three ways I’m coping with the stock market’s recent bout of weakness and aiming to build wealth in the longer term.

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Bearish opinions about the stock market seem to be everywhere right now. But that doesn’t change the long-term record of shares as being a decent generator of wealth.

For example, in the UK, the lead FTSE 100 index has delivered multi-bagging returns since it started in 1984 at the level of 1,000. And billionaire US investor Warren Buffett pointed out that America’s S&P 500 index has, over decades, delivered total returns annualised at about 10% a year.

Setbacks along the way

And those outcomes have been despite the many dips, downturns, wars and recessions along the way. Indeed, the fortunes of businesses and stocks vary from time to time. And that’s especially true over the short term. But if I invest in quality, growing businesses with a long runway of growth it’s possible to experience a decent long-term investment outcome. Although that’s not always true, because all shares come with risks as well as positive potential.

One of the key drivers of a good long-term stock investment can be buying at a fair price in the first place. Valuation matters. And the recent collapse of many overpriced growth stocks has demonstrated that truism once again. But periods of weakness in the markets can be some of the best times to find quality businesses trading on fair valuations. Although I admit getting interested in shares can be difficult emotionally during such conditions. 

My own method of coping involves three strands. Firstly, I’m keeping up my regular monthly investments into my low-cost index tracker funds. My strategy hinges on investing those monthly sums through thick and thin. And I’m hoping that approach will help to deliver a long-term outcome that matches the market.

Ignoring the headlines

Secondly, I’m targeting the shares of individual companies. With my crash helmet on, I’m trying to ignore the economic and geopolitical headlines. Instead, I’m focusing on my watch list of great businesses and looking for good-value entry points. A key part of that strategy is to focus on the news flowing from the businesses that interest me.

Thirdly, I’m holding on tight to the shares of the great businesses I already own. And that’s despite weakness in their share prices in many cases. But as long as the original investment thesis continues to hold up there’s no need to sell. My aim is to look past short-term volatility in operations and share prices. In the longer term, the investment outcome may be satisfactory. But of course, that’s not guaranteed.

These are uncertain times. That’s for sure. But there’s always something to worry about and that’s why we have the old adage that stock markets tend to climb a wall of worry.

Despite recent setbacks and ongoing worries. I’m certain the stock market has lost none of its potential to make me rich over time. So I’m keeping my investing nose to the grindstone and carrying on.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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