What I learned in 30 years of investing

Here is the link. John Rekenthaler, the author is vice president, Morningstart, Inc.


Fact 1:

In March 1988, I placed $1,000 in my first mutual fund. Since that time, I have left the fund untouched, to accumulate. And accumulate it has. Today, that $1,000 is worth $14,834.

15/01/19

My own story 

I did almost the opposite. In 2001, I bought $3,000 us dollar VIGRX, and then in 2002 I sold as a loss, and then in October I bought an expensive SONY laptop $1800. I killed the everything, the SONY laptop still is in my friend's house in Florida. 


Argument 1:

If stocks return 10% annually and inflation is 3%, it's difficult to go wrong with equities. High costs, mistimed trades, poor manager selection … the mistakes wash away. To be sure, such decisions matter. Best to get them right and maximise one's profits. Nonetheless, the critical decision was to hold stocks. Better to be dumb with equity than smart with bonds.

Exercise 1:

How to Reach $1 Million

Assuming that my health holds up, and that I have no immediate need to spend the money, my first investment could have an effective life span of another 20 years, roughly speaking.

If so, and if the fund were to perform as it has in the past, then that 700% after-inflation increase would become 2,500%. 

Now we're talking. Reaching that hypothetical goal of $1 million, as defined by 1988 dollars, would have required a $40,000 initial outlay. 

Beyond my means at the time, but not an inconceivable sum for somebody in his late 20s.

Of course, this exercise only involves one purchase, with no further activity.

In real life, the stock market mathematics are far easier, because people typically invest on an ongoing basis.

If they do so with equities, stay the course for several decades, and stocks perform anything like they have during my working career, today's young workers will fare well.

In 1988, I bought stocks because I landed a position at an investment research company. Had that accident not occurred, I would not have purchased equities that year, and probably not for many years to come. The blind squirrel stumbled upon the nut.

Will the next generation be similarly fortunate? I have assumed that that future real returns on equities will resemble those of the past. That was what I believed in 1988, and it turned out to be correct. Will 2019's novice investors find that same nut?

The answers to those questions are beyond anybody's pay grade.

We do not, and cannot, know if the soundest investment advice that the next generation can ever receive is what I would instruct my younger self: buy stocks early, and buy them often. However, the subject bears discussion. As I have realized while thinking through my 30-year Morningstar anniversary, the level of stock market returns dominates all else. It is, as the saying goes, the elephant in the room.