Gil’s Musings

Staying Power of Investing

When you’ve been in the investment business for 36 years, you tend to get the same sort of questions over and over again. One that I hear repeatedly surrounds how scary the current moment is.

Yes, this is a scary moment in our nation’s history. However, scary moments also existed when the market crashed 27% in one day in October of 1987, during the tech crash in 2000, and the 2008 meltdown caused by the mortgage crisis. Today, it’s riots and COVID issues.

The point is that there’s always a reason to talk yourself out of taking the risk of investing. It takes a certain optimism to realize that though each risk seems frightening through the windshield, it will appear impotent in the rearview mirror. I recently answered that popular question a little differently, armed with evidence I discovered in my own account.

A Facebook friend responded to a financial comment I made on my personal page. She asked for my advice about investing in unpredictable times like these. I replied that maybe she was asking the wrong question.

Since early 2013, I have bought shares of a low-cost stock mutual fund in a fixed amount each month. That means I’ve made about 90 separate “buys” over these 7 ½ years. I received quarterly stock dividend payments that were reinvested in more shares at the time; that would be 30 more buys. I also received six annual capital gains distributions that were reinvested, as well. So, that’s 126 “purchase events.”

On the same day that my friend asked the question, I had just looked at my gain/loss history of all those shares and noticed that not a single one was at a loss. How many crazy swoons occurred in the past nearly eight years that I surely regretted for a time? But as I look at each one of the 126 purchases, what difference does it make to me that some are up 112%, some 47%, and some at 6%? As long as there’s staying power until the next new high on the market, what do price swoons really mean? To me, they mean nothing other than periodic agitation that is rendered irrelevant by the next peak, which will wipe out all my prior anxiety.

Here’s a little exercise. Name a nasty market decline that was not subsequently erased by a strong market, thus eradicating all prior losses making all that anxiety futile? I’m waiting…

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