The hamster wheel literally describes the concept of lots of activity but making no progress.
In times of crisis, either real or imagined we are encouraged to do something. If your house is on fire or if you witness a car accident you must do something and quick. Why is it that doing nothing when it comes to our investments is so difficult. When clients ask “what are you doing…” sometimes the better question is “is there anything that needs to be done” related to our investments? Are you OK with doing nothing when nothing needed to be done?
Below are just a few quotes from successful investing icons on the value of patience and using their “secret” investing advice. TIME.
- Invest for the long haul. Don’t get too greedy and don’t get too scared. – Shelby Davis
- Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that. – Charlie Munger
- The stock market is a device to transfer money from the impatient to the patient. – Warren Buffet
- Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves. – Peter Lynch
- The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has. – Jack Bogle
- You make most of your money in a bear market, you just don’t realize it at the time. – Shelby Davis
When will the current “bear market” run its course? No one knows for sure but if it is like the “average” bear market (14 months), it will be sometime early next year. The more important piece of data that can be gleaned from this chart is -33% over 14 months vs +279% over 72 months. (Bear markets are measured in months, Bull markets are measured in years). By investing in equities and adding the secret sauce TIME you put yourself in a position to experience these kinds of returns on your invested dollars.
Here are 3 takeaway investing lessons to ponder and put into practice:
- Time is the biggest contributor to creating wealth. Assuming you are investing in a diversified portfolio the more time your investment is left alone to grow, the greater the likelyhood you be successful.
- Have a plan & stick with the plan. Investing in a portfolio of diversified low cost mutual funds/ETF’s that match your risk tolerance and return on investment (ROI) expectations is (in our opinion) the best way to grow your wealth over TIME.
- Evaluating investments over the short term time (< 5 years) reduces your chances of investing success. The chart below shows how an investor hoping for a 6% ROI who started investing in 2008 (just before the financial crisis) would have fared over a 10 year period. The solid green line is a 6% yr compounded return, the gold line represents a balanced mutual fund purchased at the same time. It took 5 years for the mutual fund to meet the 6% expected return but its results far exceeded the expected 6% ROI. If you had evaluated it after the first few years would you have decided that this was an above average mutual fund. By year 5 it had averaged 6% a year and by year 10 it had averaged almost 9% a year.
This graph presents past performance, which does not guarantee future results. The investment return and principal value will fluctuate thus an investor’s shares, when redeemed, may be worth more or less than their original cost. It is not a recommendation to buy or sell any investment.
My point is if you have an investment plan… be patient, give your investments TIME and we believe you will be in a better position to realize positive investment gains. If you do not have an investment plan that you understand and are comfortable with use this LINK to schedule a call to speak with one of our investment professionals.
Dave Conley, CFP