Friday, May 1, 2015

The Guts of Investing

Last post we looked at the 'lost fifteen years' in the Nasdaq composite index, which started in 2000 at 5,048 and ended this spring when the Nasdaq finally got back to that level.  The takeaway was that by dollar cost averaging into the market like the vast majority of people should be doing, investor returns would have been north of 9% per year as opposed to the 0% that the major news outlets would have us believe. 

I want to make sure, however, that I don't mean to infer that I think the Nasdaq, S&P 500, or any other market measurement is overvalued, undervalued, or anything in between.  I proudly and with a clear conscience proclaim to have no such insight. ( I prefer to do my gambling and guessing on the blackjack and dice tables.). Rather, my intention was to make some of the same philosophical points as always:

  • Smaller stocks have higher historical returns (and higher expected future returns) than large stocks because small stocks are both more volatile and more risky, which are most certainly not two way of saying the same thing
  • We have successful investment experiences not by guessing the future, but by having the fortitude to stick to our plans while riding out the wild swings in markets

In short, we get paid to have guts.  Warren Buffet said "I want to be greedy when others are fearful, and fearful when others are greedy."  We've seen nearly four out of five dollars that were invested in Nasdaq stocks disappear from peak to trough.  And yet more than doubled our money by being fully invested through that. 

So the question is not "Will this happen again?" or "Do time honored strategies still work?"  It will and they do. The question is "Will you have the guts to rely on history or give in to the fear of speculation next time?"  

We can help you do the former and avoid the latter.


  1. You have done a great job. I will definitely dig it and personally recommend to my friends. I am confident they will be benefited from this blog...
    business valuation San Francisco

  2. Are you struggling to make ends meet when it comes to your personal finances? credit repair