3. Fundamentals matter.
Perhaps the most impressive thing about the Dow’s rebound is that it has been supported by fundamentals. Earnings have risen dramatically, as corporate profit margins have gone through the roof. Companies have taken advantage of rock-bottom interest rates to refinance debt and build up cash reserves to make sure they never have to go through an episode like 2008’s cash crunch ever again. Moreover, companies have treated investors well by increasing their dividends.
As a result, even at record levels, the market doesn’t look as overvalued as it did the last time it set new highs. That’s good news for investors who are just now looking to get in, but more importantly, it emphasizes how stronger businesses lead to better stock returns.
4. Long-term investing does work.
The essential lesson that the four-year bull market has reinforced is that investing for the long run isn’t a lost cause. Over time, markets have risen, and as dire as the financial crisis was, it didn’t prove any different in that respect.
For many investors, these lessons were hard-won, especially for those who have watched the market’s advance from the sidelines. Regardless, making the best use of these lessons in the future can help you avoid mistakes and make the most of whatever opportunities the next four years may bring.
The article 4 Lessons From the Dow’s 4-Year Bull Market originally appeared on Fool.com and is written by Dan Caplinger.
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