The power of staying the course with investing.

With investing, it’s easy to get distracted by shiny new objects.

In a bull market, it seems everyone has an opinion on stocks and investing.  

The thrill of the chase and the promise of quick gains often leads to poor investment decisions. It doesn’t help when financial media is flooded with stories of the latest IPO or that 22-year old who is now worth millions after investing their pocket money in bitcoin.

The truth is, there is only one thing that matters to become a good investor.

Time.

When asked about his investment process, Warren Buffett, a man who knows a thing or two about investing, said,

“Benign neglect, bordering on sloth, remains the hallmark of our investment process.”

The reality is, with investing, there are a few paths you can take. You can take the short-term approach, chasing quick wins, jumping in and out of investments with the hope that you will time the market, or you can stay the course and benefit from the gains you only get from time.

But, how do we know that staying the course is the best strategy?

Let’s look back at the year 2000 and the peak of the dot.com boom. In March 2000, the Nasdaq Composite Stock Market Index rose 400%, with investors, particularly personal investors, desperate to get their hands on any stock with a .com next to its name, at any valuation.

The explosion of interest in dot.com stock was pre-empted by rapid growth in personal computer ownership in the late ’90s and growth in browser technology, giving consumers broader access to the world wide web.

Our good friend, Mr Buffett, famously issued a warning to his stockholders in 2000, saying

“They know that overstaying the festivities—that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future—will eventually bring on pumpkins and mice,”

By October 2002, Warren Buffett’s prediction came true with the market crashing, losing all the gains made during the dot.com bubble and investors losing money as many companies failed and shut down.

What has to be said is that some dot.com companies did survive and thrive. Two of the most famous were Amazon.com and ebay.com who had sound business models and revenue to justify their survival. 

And if you invested in those businesses and held onto them, your investment would be well rewarded. Since its IPO, Amazon shares have grown by 40,000%, so a $1000 investment in Amazon shares 20 years ago would now be worth $400,000.  An excellent return for long-term investment and a clear example of the benefits of staying the course.

So if you are interested in staying the course, give us a call. We’d love to have a chat.

Author: Angus Dockrill

Angus is a Director and Wealth Specialist at IMFG. Angus helps people to improve their quality of life and peace of mind by making smarter financial decisions.  See his profile here

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