If you’ve read my book, The Stock Market is for Everyone, and was inspired to begin investing in the stock market, right about now you might be second-guessing your decision to purchase the book in the first place. The volatility in the stock market has returned with a vengeance, after being missing in action for most of the last eight years.
It’s never fun to watch your portfolio go down in value, whether you’ve been investing for six months or six decades. Moments like these, though, will make you a better investor…if you can stomach the volatility and follow my advice.
For most investors, this principle is the most difficult practice to adhere to. However…the number one reason investors fail is not because they buy the wrong companies. It’s because they sell too soon.
Warren Buffett and the founders of The Motley Fool, Tom and David Gardner, have two of the best track records of any investors over the last 25 to 50 years. They have each done empirical studies of every single investment they’ve made. Both concluded that their returns, although staggering, would be even better had they never sold a share of any winner, as well as any loser!
Here’s why. A correction, which is what we are in at the moment, can last a few months to a few years. It is impossible to know how long any correction will last; however, the one thing that we can be sure of is that the market goes up a lot more than it goes down.
And that’s why the best strategy any investor can have – in spite of everything you hear in the mainstream media – is don’t sell.
Let me give you an example.
Over the last five decades, Berkshire Hathaway has been an enormous wealth creator. In fact, a $1000 investment in the early 1980s would be worth over a million dollars today.
In the period between then and now, there have been five instances where the stock has fallen between 30 and 60 percent. If you had sold at any one of those times, you would have missed out on some of the biggest returns the company has to offer!
That’s why we at Wealthy Joe Investing are long-term investors. We will not be shaken up by short term volatility.
Again, if you are new to investing, this could be very unsettling. And I do understand! I am, however, 100 percent confident that if you ride this out, you will be very happy that you did.