You Missed the Best Day to Buy

Read an interesting article posted at The Motley Fools. The original post is here. Below is the excerpts:

There was once a woman who prayed every day for 20 years that she'd win the lottery. Every single day. Finally, in despair, she said, "God, I've been a true and faithful servant and have lived an exemplary life. Why won't you grant me this one thing?"

"Look," said God, "at least meet me half way -- buy a lottery ticket."

Buy the ticket!

Similarly, in order to take advantage of the greatest long-term wealth-building machine available to individual investors, you have to be in the market. And if the current craziness is keeping you away because you fear a huge drop, you're ignoring the advice of some of history's top investors.

In the latest edition of his book Stocks for the Long Run, Jeremy Siegel charted returns for a hypothetical unlucky investor who happened to invest at the absolute top of six major 20th-century market peaks. After 30 years, this investor actually accumulated four times more wealth in stocks than he would have in bonds, and five times more than in T-bills. For a 20-year period, he doubled the bonds return.

Consider John Templeton, founder of Templeton Growth Fund and widely regarded as one of the best investors of his generation. His advice about getting into the market is simple: "The best time to invest is when you have money. This is because history suggests it is not timing which matters, it is time."

David and Tom Gardner, who've beaten the market by a tremendous amount in Motley Fool Stock Advisor, also eschew timing the market. "The best time to invest was yesterday," says Tom. "The next best time is today." So even though the tongue-in-cheek title of this article implies you've missed your best chance, you can see that you really haven't. If you've got money you won't need for five years or more, just get in the game as soon as you can.

Still need convincing? I looked back a decade, specifically searching for companies that had been up 50% or more in one year. Surely, many investors back then were worried that stocks were too rich and ready for a great fall. Well, a gnarly bear market did start up a couple of years later, and yes, these stocks fell (he's referring to the dot com bubble that went burst in late 2000). And yet despite their tremendous prior one-year gains, and despite the great bear market, their returns were magnificent for those who held for the long term.

.. he went on to show a table of stocks that have been claimed as "too high" back in 1998 like Yahoo, Dell, WalMart and etc. Some of these stocks continued to grow (from 1998-2008) and posted returns that even exceeded the S&P 500's (the index for the 500 largest American companies) returns of 51% over the next 10 years.

I am not encouraging people to simply go out and buy whatever they see in the market today, for 2 reasons:
1) There are always bargains, as well as overblown balloons in the market. Nobody wants to get caught holding inflated balloon (a thin sheet of rubber holding only empty air). What the above article was saying is that the "MARKET" will generally be up in the long run, not individual stocks. In other words, if you've bought every single stock in the market, on average, you will have a positive returns in the long run. This is good for those who doesn't want the trouble of researching the individual company and opt for investing in the market. Best way I have known to "invest in the market" is through the purchasing of the Index Funds. These are the funds that hold every counter in the index; and

2) This method of investing might have proven to work in mature markets like the US and European markets, but I doubt that there are studies that have been carried out in our own regional markets. So, whoever that decided to construct a statistical studies on own regional markets, please do forward me a copy of your studies. I will be more than happy to have a look.