There are lots of lessons about investing in the stock market and building for a better future, and for the most part, we can encapsulate them in the month of October. The first thing is panic-selling. Sure, it’s easier said than done not to hang tough when the market is in freefall mode. Last month, the more the Dow declined, the higher the volume-pure panic selling or what we call on Wall Street, “capitulation.”
Getting in and out of the market is very difficult, and 99% of the time you’re going to be wrong. Sure, you can miss disaster for a period of time. In October, it was a week max, but the rub is that people rarely got back in at the bottom.
I subscribe to being mostly or totally invested all of the time, and while that doesn’t mean owning the same stock, it does mean that you aren’t hop scotching around picking tops and bottoms.
Take a look at what $10,000 in the S&P 500 from December 31, 1993 to December 31, 2013 would have earned you. If you bought and held, your account would have been worth $58,332. If you somehow missed the 10 best days, which often come after bad days, your return would slip to only $29,111 and you actually would have wasted a decade "playing" the market jumping in and out and missing the best 40 days.
Keep Soaring
August 9, 1896, Otto Lilienthal, known as the glider king for his advances in hang gliders and aeronautics, was stalled in midair fifty feet off the ground and fell to earth breaking his spine. The next day he died, but before he did, he uttered his legendary last words: "sacrifices must be made."
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Such thoughts are on everyone's mind after the magnificent explosion of an Orbital Sciences rocket and then tragic crash and death of one pilot of the Virgin Galactic.
Company owner Richard Branson could not promise the dream of space tourism would continue, saying he couldn't go on blindly. Adding "once we find out what went wrong, if we can overcome it, we will make absolutely certain that the dream lives on.”
I can only hope both catastrophes were due to mechanical errors that can be fixed, so that the sacrifices made thus far haven't been made in vain.
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