Patience and steadiness rewards

On Friday, the Nasdaq Composite (a stock market index heavily weighted towards companies in the technology sector) finished up 2.09%, closing at 13,047.19, reflecting a rise of more than 20% from its low in June.

This means the Nasdaq Composite is officially in bull market territory again.

Obviously, this shift may be temporary. The market expects to be volatile throughout the rest of the year, but inflation was lower in July, gas prices have been dropping precipitously for weeks, and employment numbers were stronger than expected, causing stocks to surge,

Eventually, volatility will decrease in the market and things will turn around for a longer, more certain period of time, as they always do.

Here’s the problem:

If you wait for things to turn around before investing again, you’ll be paying for stocks on the way up instead of on the way down. You’ll pay more for companies that are oftentimes fundamentally the same on the way down as they are on the way up.

You pay a premium rather than a discount, thus reducing your overall return on investment.

This is why I was purchasing stocks and increasing my level of investing dramatically in March of 2020. As many shareholders were divesting in the market in fear of what might happen to the world during the pandemic and the stock market was plunging, I was paying rock bottom prices to increase my investment in large, stable companies that were likely to weather the pandemic relatively unscathed.

This strategy paid off handsomely.

This isn’t because I’m an especially savvy stock picker. I don’t possess any inside information.

I understand one simple tenent about investing:

The stock market, given enough time, will produce positive gains.

If you’re wise enough to continue investing as the stock market loses value, you’ll realize those gains in larger, faster quantities.

Investing, as I say to my children so very often, is about “taking care of your future self.”

These are two quotes, spoken by two of the most successful businesspeople of their time, that I think about a lot when it comes to investing. They are essentially saying the same thing in two different ways, but I tend to think that nothing wiser has ever been said when it comes to investing.