IT’S NOT ABOUT TIMING THE MARKET THAT MATTERS, IT’S YOUR TIME IN THE MARKET!
If you missed the top ten best days in the S&P 500 for the past nine decades (Total of 90 days forgotten out of ~2,340 total days), your ROI was 91%. If you had simply sat through the ups and downs and been in for ALL 2,340 days, your returns were 14,962%. I rest my case!
In 2020, following the March crash due to COVID, new investors have been leaping into the stock market like college students offered a one-night stand with a hottie. My editor is unavailable this week, so that I can add that last sentence. Many of these new investors have seen massive profits and now believe they are the next Warren Buffett. My question for them, WHEN the market crashes in 71 days (I made that up-do, not panic), will they HOLD, BUY, SELL.
During a hot market, identifying short term potential investments is reasonably straightforward. The real work is conducting research and finding long-term great investment stocks.
HOW LONG DID IT TAKE YOU TO SAVE $10,000.00?
The average American household earns about $65,000 annually. Assuming a savings of 10% of income outside the 401K Plan, it would take about 18 months to save $10,000.
{Note: It usually is best to fund your 401K versus other saving accounts, excluding building six-plus months of emergency savings, due to tax advantages and company matching dollars. You can find this link following the conclusion: DO YOU WANT TO JOIN THE 401K PLAN MILLIONAIRE CLUB? {KINDA LIKE THE MILE HIGH CLUB – BUT A LOT LONGER LASTING!}
HOW MUCH TIME DO YOU RESEARCH BEFORE INVESTING 18 MONTHS OF YOUR LIFE SAVINGS?
How about one percent of the time you worked to save the money? Sound reasonable? That is about 30 hours versus the 2,880 hours of work you put in.
I advise you to spend a reasonable amount of time understanding any company you consider investing your HARD-EARNED money! One percent is the BARE minimum! I recommend and invest more time in my portfolio.
PICKING POTENTIAL LONG TERM INVESTMENTS
About 95% of millionaires invest in stocks, and most have 20% or more of their net worth in the stock market. The majority are long term investors who buy and hold for years.
Here are some company characteristics I look for when selecting to buy and hold investments.
DOMINATE THEIR INDUSTRIES – LIKE APPLE {10 YEAR RETURN = 860 %}
Without a doubt, Apple is a dominant company. The first company to cross the Trillion-dollar threshold and headed to $2 Trillion. Companies LIKE AMAZON AND APPLE dominate their industries. Both companies have a strong track record of industry domination and continuously bring out new products and services well received by consumers.
There are ZERO guarantees any company can continue to dominate going forward. Decades ago, Sears was a dominating business. Today it is almost DOA! When you own stock in a company that is beginning to lose market domination, time to LOSE that stock! Do not wait until you LOST all your money!
MUST BE ABLE TO EXPLAIN WHY I OWN A STOCK TO A TEN-YEAR-OLD OR POLITICIAN – LIKE COSTCO {10 YEAR RETURN = 437%}
I shop at Costco. I almost always underestimate how much I will spend. For me, it is like walking through a treasure hunt. Costco strategically moves products around the store to make you walk around searching and hopefully find something you did not plan to buy. It is very annoying, but it works, at least on me!
Costco makes the bulk of its profit from membership fees. And the majority of members renew each year. Apple and Costco have incredible stickiness in retaining customers.
Because of the pandemic, Costco’s membership numbers grew, and customers begin to buy a lot more than toilet paper in bulk! I still do not get the hoarding of toilet paper! Cinnamon rolls, sure!
When you understand a company’s products/services, you make investment decisions based on knowledge.
Stay away from companies you do not understand. If you cannot understand precisely what a company does that adds value- SHIELDS UP – EVASIVE ACTION!
A SOLID TRACK RECORD IS MANDATORY! – LIKE AMAZON {10 YEAR RETURN = 1,829 %}
Select companies that have been in business for several years and have a track record of increasing revenues and profits consistently. For example, you might look for a company whose revenues and profits have grown in eight of the last ten years.
VALUE OF THE COMPANY’S SERVICES/PRODUCTS ARE INCREASING – LIKE PAYPAL {10 YEAR RETURN = 546 %}
I like most people in the U.S. have used PayPal. The payment processing company is the dominant player in online payments, which means it was perfectly poised to handle the pandemic and make their investors more money.
COMPANIES THAT HOLD A COST ADVANTAGE – LIKE WALMART {10 YEAR RETURN = 176 %}
I remember when Wal-Mart built a store in my childhood hometown. Within two years, they shut down 90% of Mom-and-Pop stores. Within three years, downtown was a ghost town as these small stores could not compete with Walmart on price.
IT’S ALL ABOUT DIVERSIFICATION!
The easiest way to achieve diversification is an index fund, such as the S&P 500 index. If you pick stocks, the worse thing you can do is invest half or more of your money in a single industry. If you had invested half your money in U.S. airlines, in late March 2020, you lost 50-75% of your hard-earned money.
It’s all about diversification, and that matters whether you are in ETF’s Funds, Individual Stocks.
CONCLUSION – IT’S NOT ABOUT TIMING THE MARKET THAT MATTERS, IT’S YOUR TIME IN THE MARKET!
Warren Buffett is the GOAT of stock investing. However, Mr. Buffett invests on average eight to twelve hours DAILY doing investment research. He prefers the old-fashioned reading of printed materials. Buffett advises unless you can spend hours per day researching the market, buy an S&P 500 ETF Market index. You will outperform the majority of family and peers.
Because passive funds merely replicate an index’s composition, they are inexpensive to manage and charge low fees to the investor.  Most S&P 500 ETFs (passive funds) charge 0.04% in fees or LESS.  The average passive fund charges 0.13%, compared with 0.66% for active funds.Â
Hedge funds generate greater returns for the Hedge Fund Managers! Hedge funds typically charge a ridiculous 2% fee, plus 20% {Not a typo} of whatever the fund makes over a predefined return threshold. These outrageous fees are why the top U.S. hedge fund managers earn greater than $1 Billion some years!  {No one told me this when I majored in Chemical Engineering!}
PREVIOUS APPLICABLE BLOGS
DO YOU WANT TO JOIN THE 401K PLAN MILLIONAIRE CLUB? {KINDA LIKE THE MILE HIGH CLUB – BUT A LOT LONGER LASTING!} – CLICK BELOW LINK
INVESTING IN STOCKS IS COLOR BLIND – WHAT IS STOPPING YOU? – CLICK BELOW LINK
KEEP IT SIMPLE STUPID {KISS} – THE S&P 500 ETF INDEX– CLICK BELOW LINK
IS IT TOO LATE TO BUY- FANG {FACEBOOK, AMAZON, NETFLIX, GOOGLE} STOCKS? – CLICK BELOW LINK
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ABOUT ME
I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an N.C. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I left a corporate career because I desired to make a difference as a speaker and writer to help others. I was blessed to be coached and mentored by strong women and men in my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (a small but brilliantly created plant nursery). I am a successful investor in stocks, options, real estate, and happy to share my finance and investment lessons learned with you.
However, I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog as recommendations for your situation. For individual financial advice, please seek your licensed CPA or fiduciary financial advisors.
I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.
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