One Secret for Timing the Bottom
Stop trying. It never works.
Investors are obsessed with the idea of timing the market, getting out before the big crash and then buying at the bottom.
Let me tell you something: investing doesn’t work that way.
Over the past 20 years, the best 10 days in the market were responsible for the lion share of gains that investors made big money on.
And if you missed those 10 critical days, you’d make less than 3% per year on your investments.
If those are the kind of returns you want, you might as well save yourself the hassle of buying stocks and buy bonds instead.
But you want to know the real kicker? Most of those 10 days took place during bear markets!
That’s why you want to take advantage of this bear market and buy shares now — while stocks trade at steep discounts.
Not only will you end up buying great companies at great prices, but you’ll sleep better at night knowing that you invested with a high margin of safety.
In today’s video, I share why investing this way — treating stocks like pieces of a business — is the only way to make real money in the markets:
I’ve been telling readers of Alpha Investor Report that now’s the time to buy stocks if they want to see high returns on their investments in three to five years’ time.
In fact, many of the companies I’ve had on my watch list have finally dropped into bargain territory — and are trading at fantastic prices.
I’m working on a new recommendation that I’ll share with my readers in the next couple of weeks.
This company is almost never cheap — nor should it be. But because of current market volatility, this company is trading at bargain prices.
And if you act quickly, you could have a chance to buy into it … before its share price starts to rise.
Click here for more details on how to sign up for Alpha Investor Report today — before my brand-new stock recommendation goes live.
Avoid This Mistake Now
I’ve seen this for over close to 40 years now…
After every decline, it always seems that there are people who say, “Didn’t you know the market was going down? Didn’t you see the crisis that caused the market to go down?” And I have to chuckle at that.
Because it always brings up several questions…
If they knew, why didn’t they tell me? How are they so cocksure about it? Why didn’t they make money with it? And even if they did know what was going to happen in, let’s say, February … how the hell do they know what’s going to happen in April or May?
Because every time a market plunges, you have the Monday morning quarterbacks. And when it’s time to get in, a few of them will always say, “Well, I just want to wait until the future is clearer.”
Folks, the future is never clear or obvious. That’s why it’s the future! We don’t know what’s going to happen with any degree of certainty. But we can use probabilities in order to make better investment decisions.
Don’t Trade Emotionally
I find that during market slides — especially during panics — people invest with their emotions. And that is the worst way to invest.
Instead, when I go to buy a stock, I look at it as if I’m going to buy a private business. I don’t look at forecasts, I don’t look at expert opinions and I don’t look at guesses.
I basically do what I would do if I bought a private business, like a coffee shop or a hardware store…
I look at the private business, I look at the financials, I look at management, I look at the past several years of sales and earnings and then I make a decision in a price based on that.
Just because there’s a quotation on a business — which is basically what a stock is — trading all day long doesn’t mean you need to do something. Only use those quotations when it’s to your advantage — when you get great deals.
Think about this for a second. I’ve always been amazed by this…
In the last 20 years, if you had just held into the market, you would have a pretty good return. In fact, if you just stayed put for 20 years, a $1,000 investment would have turned into over $32,000, or 6.1%.
Now, if you were in cash during the top best days in the stock market — just 10 days out of those 20 years — guess what happens? You would have missed the 10 best days in the market and your return would have gone from around $32,000 to about $20,000, or 2.4% per annum.
Now, if you missed the best 20 days during that 20-year period, your returns would’ve gone to $10,167, or 0.08%. In other words, you would have taken a great return — $10,000 into $32,000 — and turned it into a flat return.
Ask Any Investor: Time In The Market Beats Timing The Market
Now, here’s the thing … Most of the best days in the market happened in the throes of a bear market.
So, if you panicked during a bear market and sold, I could guarantee it, dollars to donuts … you missed the best days.
Take a look at this chart…
These are all of the Dow’s best days since 1933. Guess what? All of these days happened during a bear market.
And the recent rise, when the Dow climbed 11%, was on March 24, 2020. And that came after a 30% slide.
Now, the point I’m trying to make is: Panic is not an investment strategy. Timing the market is futile at best, and disastrous at worst.
After the February market selloff, many stocks are still trading — and continue trading — at discounts.
Throw in that the economy’s been backed up by the Fed’s infinite balance sheet and fiscal stimulus measures (which are going to be rolled out in stages throughout the next 10 to 12 months), and you have all the ingredients for the next bull market taking place now.
I would not want to be on the other side of a trade against the Fed and government stimulus.
It turned out disastrous for those who took the other side in 2009, and the market went up close to 400% over the next several years.
So, to sum it up…
- Trying to time the market is difficult — if not impossible. Just sitting out a handful of the best days, and your returns over the long term are cut in half. Sit out more than just 10, and your returns are smashed.
- Panic is not an approach. And things never really settle down. The future is always uncertain. The key is to have an approach of looking at stocks as if you’re buying a piece of a business.
Look at a stock based on its balance sheet, financials, prospects for the long term and great management in the industry that it’s in. Buy it when it’s trading at a discounted price, and then sit on your ass and let the business make money for you. It’s just that simple.
Keep in mind that my suggestions of sitting through this only apply if you own stocks that are great, financially sound businesses.
All the sitting in the world won’t help you if you bought stocks that are heavily in debt, the latest fad — pot stocks, bitcoin or something silly like that — or in terrible industries, like oil. That’s not going to help you.
So I’m going to offer you the same advice I’d give you if you were going to ride a rollercoaster: Sit down, shut up and hang on. The best gains are made by sitting — not by trading.
Editor, Alpha Investor Report