There was once awoman who prayed every day for 20 years that she'd win the lottery. Every single day. Finally, in despair, she said, "God, I've been a true and faithful servant and have lived an exemplary life. Why won't you grant me this one thing?"
"Look," said God, "at least meet me half way --and buy a lottery ticket."
Buy the ticket
Similarly, in order to take advantage of the greatest long-term wealth-building machine available to us individual investors, you have to be in the market. And if the current craziness is keeping you away because you fear a huge drop, you're ignoring the advice of some of history's top investors.
In the latest edition of his book Stocks for the Long Run, Jeremy Siegel charted returns for a hypothetical unlucky investor who happened to invest at the absolute top of six major 20th-century market peaks. After 30 years, this investor actually accumulated four times more wealth in stocks than he would have in bonds, and five times more than in T-bills. For a 20-year period, he doubled the bonds return.
There's more where that came from
Consider John Templeton, founder of Templeton Growth Fund and widely regarded as one of the best investors of his generation. His advice about getting into the market is simple: "The best time to invest is when you have money. This is because history suggests it is not timing which matters, it is time."
Our own David and Tom Gardner, who've beaten the market by a tremendous amount in Motley Fool Stock Advisor, also eschew timing the market. "The best time to invest was yesterday," says Tom. "The next best time is today." So even though the tongue-in-cheek title of this article implies you've missed your best chance, you can see that you really haven't. If you've got money you won't need for five years or more, just get in the game as soon as you can.
Still need convincing? I looked back a decade, specifically searching for companies that had been up 25% or more in one year. Surely, many investors back then were worried that stocks were too rich and ready for a great fall.
Well, a gnarly bear market did start up a couple of years later, and yes, these stocks fell. And yet despite their large prior one-year gains, and despite two big bear markets (including the current one), their returns have been solid for those who held for the long term -- especially when compared to a market that has lost 27% in the meantime.
Company
1998-1999
1999-2009
Gilead Sciences (Nasdaq: GILD)
27%
1,556%
Amazon.com (Nasdaq: AMZN)
646%
62%
Walgreen (NYSE: WAG)
35%
26%
CVS Caremark (NYSE: CVS)
31%
33%
Amgen (Nasdaq: AMGN)
96% Continued... |