Often enough, you will hear from conventional financial planners that quickly entering and exiting certain stock market investments has the realistic possibility of being a futile endeavor, and usually the explanation “why” simply focuses on the fact that stock market prices are fickle in the short term and can take years and years to correctly reflect the value of the enterprise you have in mind. That’s absolutely part of the equation, but there is more to it than that: almost all of the stock market’s gains come in very short bursts that are wildly unpredictable.
Originally posted 2013-06-06 09:00:05.
Here is a quick overview of today’s movements in the stocks I “follow” on my Seeking Alpha homepage:
As you can see, the price of every single company that I follow went down today. For some people that try to buy a stock at $30 and sell it at $70, that is bad news. It means they are losing money.
But if you craft a long-term strategy and think like a business owner, you will develop the kind of wiring that appreciates falling stocks because it matches your goals. When I invest, I am trying to buy the most future profits (in the form of dividends and retained earnings) at the lowest price I can, adjusted for risk. I make an exception here and there to DRIP into a high quality stock, or set aside 3-5% of the portfolio for speculation, but aside from those two exceptions, that’s what I’m about.
Originally posted 2013-06-05 22:34:28.
If we take a “big picture” look at any of us are trying to accomplish when we invest, we are almost always trying to set aside some money today with the expectation that we will have even more money during some distant tomorrow. That’s straightforward enough. If we thought that a $10,000 investment today would only be worth $9,000 in 2016, we wouldn’t do it. The tricky part that deters some people from investing is the fact that it would be more enjoyable to spend $1,000 today buying good pub food, St. Louis Cardinals baseball tickets, or Bruce Springsteen concert tickets. Those experiences provide real utility, and every dollar you invest today also means, by definition, you are not consuming something.
Originally posted 2013-06-05 17:10:20.