“Even if you’re on the right track, you’ll get run over if you just sit there.”
One of the reasons individual investors abandon the stock market is because they fear they can’t compete with the Wall Street pros. And, generally that is true. We can’t compete with them on day to day or intraday trading. They are setting up the game and driving the narrative. They are in the middle of the action and we are home with a computer and a TV and dinner in the over. I’ll happily concede the day trading to the pros. I would rather follow a civilized and proven strategy of investing for the long term.
That is not to say that long-term investing is easy. It is not. Often we are buying in the face of market sell-offs and the talking heads are predicting that it is different this time. That what’s worked in the past, will work no longer.
In my thirty-plus years of investing in and watching market trends, I have found that employing common sense and patient discipline are the primary factors to success as an investor. Following the trends is a dangerous game–you must be incredibly agile or you may just get run over.
So, begin by watching the stocks you are interested in. Observe how they perform in up and down markets. And while you’re on the sidelines you’ll learn a great deal about how the game is played, be more likely to see the train coming. Patience lends perspective and provides cover from the speculators. By watching and learning you will become a better investor when you finally do decide to jump on the stock market locomotive.
The volatility of investor sentiment is one of the reasons people are afraid of the stock market. I understand that. Irrational behavior is scary. That is why one of my tried and true investment tenets is: Know What You Know and Know What You Don’t Know.
As you dip your toe into investing, you will learn that most people have an opinion on the stock market. Almost everyone you meet will tell you they sold all their stocks before the last market crash or their broker got them into the latest growth darling at the ground floor. I often wonder if that were so why their broker is the one driving the big Mercedes? Investors like Dr. House’s patients often lie.
It would be folly to chase their tips or follow their advice. You have no business buying companies you know nothing about. That is irrational.
Know what you know. And know what you don’t know. Buy the companies you understand. Not what your neighbor is buying. Hold to that one tenet and you will keep yourself from zigging when you should zag. And, from buying at the top or selling at the bottom. Smart, long-term investing is about making informed decisions and then staying the course, not chasing the next great growth company. It is about buying companies you know and understand at a good value and letting the company managements do all the heavy lifting of growing and managing the company while you tend to raising your kids or running your household.
Good investing means that when you are aware of what you don’t know, you steer clear. And when you know what you know you have the courage to invest. These are the topics we will discuss in THE INTELLIGENT WOMAN’S GUIDE TO STOCK INVESTING. Stay tuned and follow my blog at nancy.tengler.com/
No one is more seduced by instant gratification than I am. Perhaps, that is why I love the stock market. Each day I receive a report card. That said, after thirty something years of investing in and observing the market, I also understand and appreciate the necessity of the passage of time for the growth of my investments.
If investors keep in mind that over the long term (and by that I mean since the early 20th century) the stock market has returned between eight to nine percent per year– including every bear market–then we stand a better chance of maintaining perspective.
Often at exactly the moment we should be committing capital to the stock market, the bad news is overwhelming. We want to sit on the sidelines until things settle down. BUT, if we can adjust our focus to the long-term–say ten to twenty years–then we will have the courage to step up and buy high-quality stocks when they are cheap.
I outline this proven strategy in great detail in my upcoming book, THE INTELLIGENT WOMAN’S GUIDE TO STOCK INVESTING.