Being an owner with your long term investment capital is never about following a short path to riches. 

It is nearly always about the compounded power of many market sessions.  Times like these are what challenge investors’ discipline and day by day we hold on past the doom-and-gloomers waiting for the breakout to emerge.

REALITY CHECK:  So here we are near the bottom and it seems that most of our peers have become overwhelmed and left the building.  Today being an owner often leads to second guessing … “you aren’t still investing in the stock market, are you?” … “that isn’t safe” … “I moved my money to cash and bonds” … but the market session that is right around the corner, THE bottom and the rally that follows, reaffirms once again that common stocks, over the long term, are the highest total return asset class of all.    

The below article was written by my colleague Dave Blair and published in our client newsletter this past summer.  In light of public perception, it deserves a second look:

As the markets continue to stumble along driven by fear and emotion, some people have asked if they should be getting out of the market to “protect their investment.”  Note that these are not clients asking the question, our clients already know the answer.

Short term volatility is the price we pay for long term success in building wealth.

You can see this chart in Roland’s new book, Manarin On Money.

Over time equity ownership positions have moved up and down but have always trended up.  Like a yo-yo climbing a flight of stairs.

Market timing requires two perfect decisions, whereas, staying invested in quality, professionally managed stock mutual funds requires only one decision.  Nobody makes two perfect decisions all of the time. 

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Know what it is?  I learned it over 30 years ago the hard way. 

The secret is patience.

Back then I discovered that if I stuck with my ownership-based investment strategy over the long haul and outlasted the quitters and ignored the critics, I would someday be in a better position than the majority of my peers. 

This is why I continue recommending the investment model I’ve used since then:

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The “We are in the worst economic climate since the Great Depression” wackadoos sure put up a good fight.  But now more folks are finally seeing through their flawed logic. 

From a recent Newsweek article: 

The specter of depression stalks America.  You hear the word repeatedly.  Are we in a depression?  If not, are we headed for one?  The answer to the first question is no; the answer to the second is “almost certainly not.”  The use of “depression” to describe the economy is a case of rhetorical overkill that speaks volumes about today’s widespread pessimism and anxiety.  A short history lesson shows why.

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When talking about the stock market these days, it’s easy to be wooed into becoming a long-term pessimist.  Last Friday, the S&P 500 closed at 1239.  Contrast that to where the index was trading at 10 years ago – 1164 – and you end up with a gain of about 6.4%. 

So why am I still so enthusiastic about my “stocks for the long run” philosophy? 

Take a look at history. 

The last time we went through a similar market environment was from about 1969 to 1982.  Not only were the returns middling but inflation wiped out the gains that investors had earned leaving many with a real return in negative territory. 

But people who maintained their discipline and continued acquiring equity positions were rewarded for it. 

From 1983 thru 2001, vast sums of wealth were created because certain people understood the gift the financial gods had given them and knew how to take advantage of it.  Or there were others who prospered simply from dumb luck for being in the right place at the right time. 

You see, tangible assets – real wealth – does not vanish in a market decline.  Instead, uninformed investors panic and sell their wealth while savvy investors go bargain hunting.   

And that’s the way it has been throughout history. 

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