Several years ago, my daughter was in her third season playing travel soccer. Her team was unique in that the parents (most of them, anyway) weren’t nuts. You know, those parents who think their kid is getting a free ride to a Division I university and that every play in the 13-and-under game is life or death?
The majority of the parents were great people who wanted their daughters to succeed but didn’t get worked up about a bad call by the referee. I became friendly with many of them. One guy in particular stands out for his wisdom.
He’s a few years younger than I am, has an undergraduate degree, and owns a small blue-collar business. He works hard and seems to make a pretty good living for his family.
One night, as we were watching our daughters’ team perform, we chatted about the stock market.
“I hope it continues to go lower,” he said matter-of-factly. “I invest every month, and if it goes lower, that means I get more shares and more dividends to reinvest.”
I nearly cried tears of joy.
He hadn’t read my book Get Rich with Dividends. I’m not even sure whether he knew I’m a proponent of dividend investing. Yet here was one of the few people I’d met who really understood how to secure his family’s future through investing.
Most people, when they find out what I do for a living, ask me either what I think about a particular stock that they own or whether they should sell everything because the market is up (and it can’t keep going up forever) or down (and we’re about to enter a bear market).
This guy couldn’t care less what I thought. He said he’s in it for the long term. He’s building his nest egg every month by adding shares of dividend payers and reinvesting the dividends. It doesn’t matter whether the market is on fire or in the dumps. He has his investments on autopilot. The money goes in every month, and he doesn’t touch it.
I spend a lot of time analyzing markets, researching stocks, and trying to find the very best investments for my readers.
But the truth is… the best thing you can do for your portfolio is follow my buddy’s lead. Find some stocks you like, buy some shares, and add to them (or add some new ones occasionally) at regular intervals regardless of market action.
Scared of buying at the top?
If you bought stocks at the absolute top of the market just before the Great Recession, you’d have a total return of 289.6% today and 443.9% if dividends were reinvested.
Scared of going on autopilot?
According to a study by Fidelity, the accounts that did the best were ones whose owners either were dead or had forgotten they had an account.
Now, I don’t advocate truly setting it and forgetting it. You should pay attention to see whether there is a big change in the fundamentals of your companies. But generally speaking, if your holdings aren’t hurtling toward bankruptcy, leaving your positions alone and buying more when they are down is the best way to accumulate wealth over time.
If you met my friend, you’d instantly like him. He has one of those gregarious but not obnoxious personalities. And you’d think he’s intelligent, but not in a brainiac kind of way.
Yet he’s perhaps the wisest investor I’ve ever met. His nest egg is going to be significantly larger than it would’ve been if he had tried to time the market or gotten scared whenever stocks tumbled. He’s unflappable when it comes to his investments, and he’s going to be wealthy as a result.