Investing Rules from an Old Guy

If I told you about an investment that would return on average 9.4% annually over the next 40 years would you be in? And BTW, 50% of all investors will do better than this and the other 50% of all investors will do worse.

Rule #8

Every transaction has a buyer and a seller. That means for every transaction there is a winner and a loser. In other words, you have a 50-50 chance of winning … or losing. Do you think you are better than 50% of all the other investors out there?

If 9.4% is good enough for you, save yourself a lot of trouble and anxiety and just buy SPY or something similar. SPY is the S&P500 ETF which tracks the overall market which has for the last 40 years returned on average 9.4% per year (not adjusted for inflation). See https://dqydj.com/sp-500-historical-return-calculator/

Rule #9

It’s all about the long-run.

There will be good years and bad years. The good news is that for every 1 bad year there are 2.75 good years (based on the last 30 years). That means the longer you can stay in the game, the odds of coming out ahead keep getting better and better and better.

A corollary to this is that it is not worth the effort to try and time the market. If you are in it for the long run, waiting a day or two for the right time to buy or sell will have little impact on your portfolio 40 years from now.

Keep in mind that 99% of long-term investing is doing nothing.

Rule #10

Trust in time rather than timing. The beautiful thing about compound interest is that it grows exponentially. As Albert Einstein stated, compound interest is the “greatest mathematical discovery of all time”.

To make it more tangible, know that $1 invested in stocks in 1802 would have grown to $11 million by the end of 2005!

.