Back in the day, bars used to serve free lunches.

However, there was a catch…

The food was loaded with salt.

Customers who ate the salty free lunch needed to buy beers to quench their thirst.

The customers ended up spending a lot more for the beers than the lunch cost the owner.

So, the free lunch wasn’t really free.

In 1975, Nobel Prize-winning economist Milton Friedman wrote the book: There’s No Such Thing As a Free Lunch.

It’s been out of print for a while. Copies of the book that are around today can sell for $800.

The book is based on his observations about the state of economics in the 1970s.

The takeaway from his book is this: There’s always a price you have to pay…

Price to Pay

Over the past 150 years, a $1 investment in stocks returned more than $20,000 after inflation.

Over the past 150 years, a $1 investment in stocks returned more than $20,000 after inflation.

Source: Morningstar

However, over that same time period, the stock market went through bear markets.

But there was a price to pay … volatility.

You can’t get stock market returns without the right temperament to stomach the ups and downs.

Because the key to being a successful investor is how you react to those declines.

If you can’t deal with the stock market’s gyrations, then stock investing is not for you.

My best advice would be to put your money in Treasury bills.

Treasuries yield a fixed rate and are backed by the U.S. government.

You won’t have to worry about market fluctuations.

Sure, the real rate of return — adjusted for inflation — would be negative.

There’s no free lunch on Wall Street.

Volatility is the price that stock investors pay for above-average returns.

If anyone tells you that it’s possible to earn high returns without drawdowns … hold on to your wallet and run.

Above Average

Most investors see stocks as wiggles and jiggles on a chart.

Instead of seeing them as pieces of a business, they trade them like baseball cards.

And that’s what causes much of the volatility.

Because the underlying worth of the business doesn’t fluctuate every second of the day or week.

That’s why I don’t focus on the stock price — it tells you nothing about the business.

Ultimately, the stock price follows the fundamentals of the business, not the other way around.

So, don’t look at the stock market. You don’t own the stock market.

Instead, buy quality businesses at attractive prices, and then sit on your butt.

If the stock price falls sharply, ask yourself: “Did anything in the business change?”

If not, stay the course. Because during down periods, all stocks will fall.

But those who delay gratification and invest for the long term will make the most money.

Nothing more complicated than that.

Charles Mizrahi

Charles Mizrahi

Founder, Alpha Investor