| Home | Numbers | I Like |

Tuesday 14 April 2020

Saying Hello To R100k

Make sure you sterilise it after
picking it up!
I recently made an extra R100k in just 12 days.

This must be the easiest money I have made in my life (even easier than the R83,000 I recently made by sending an email).

Prepare to be amazed as I divulge exactly what I did…

Okay here we go, this is how I did it:
  1. Drank beer
  2. Drank coffee
  3. Played with my kids
  4. Did my day job from home (just for the record, not while doing number 1, but definitely while doing number 2)
  5. Got stuck into the garden
  6. Ran on the treadmill (Comrades training has gotten really interesting...)
  7. Watched some movies with the missus
Yeah, pretty much the usual stuff I do at home. Nothing out of the ordinary.

So then how the heck did I make R100k?

Ah, I’m glad you asked. The secret to that lies in what I DIDN’T do. I didn't:
  1. Check my investments every day stressing myself out about something which I have no control over
  2. Sell out of my investments coz it can only move lower from here
  3. Start trading forex because I need to make up some of the recent losses
  4. Look for the perfect ETF or share to buy gamble on for some stupendous returns going forward
  5. Stop contributing to my investments
  6. Totally change my investment strategy
  7. Try time the market for a good place to sell/buy
I hate to disappoint, but it turned out that I did absolutely nothing special. And yet I find myself significantly better off than at the start of lockdown.

When the market is as crazy as it is at the moment it is SO important to fight the urge to do something. Panic selling, or trying to time when to buy and sell can be disastrous to your returns.

Often, making money in investing is less about what you do and more about what you don’t do.

I’m sure you’ve heard the saying – it’s the time in the market and not the timing of the market?

Well, there are two reasons why this saying is so true.

1. Do Not Miss The Best Market Days

There are a number of really interesting studies around what happens if you miss even just a few of the best market days.

For example, this article looks at the returns of $10,000 invested into the the S&P500 over 20 years and what would have happened if you missed some of the best days each year.1

Incredible! Missing even just the 10 best days over a period of 20 years (that means missing just one day every 2 years) slashes your return by more than half!

And remember how everyone says if you invest for the long term, you will make some really good money? Well they definitely mean staying invested for the full 20 years, because missing just the best day each year would have meant you actually lost money (so much for making good returns over the long term!)

And then as you miss more and more of the best days, your returns take a proper smack.

Now you might be thinking, okay, but then I will just make sure I am back in the market when the good times and the best market days are back.

Not so fast. I think this next part will really drive the above home...

2. When Do The Best Market Days Occur?

Surprisingly, the best market days generally don’t occur when things are all peaches and cream. In fact many of the market's very best days come right after some of the market's very worst days.

A study found that six of the 10 best days occurred within two weeks of the 10 worst days. For example, in 2015, the best day was Aug. 26, just two days after the worst day in the stock market that year. Good generally follows bad.

It’s unfortunate then that many people sell out right after things look really dire and the market has taken a bit of a plunge. These people experience all of the loss by selling. And then to make sure they really suffer, the market has a cruel way of usually giving us some of the biggest upward moves right after that.

Sell out after a crash and miss the following upward moves at your peril. Do this even just a few times, and your returns stop looking like the top row of the previous table, and more like some of the subsequent rows.

Stay Invested!

I guess what all of this means is that if you are going to invest in the stock market, you need to be fully committed. You cannot change your mind when things hit a bit of a wobbly. You must be willing to ride out the highs and the lows, and stay the course even when the world is ending due to
  • The Oil Crisis
  • The Dot Com Bust
  • The Global Financial Crisis
  • The Corona Virus Pandemic
Yes the downturns can be brutal and feel proper kak, but if you want the full equity investment rewards, you need to be in it to win it.

All of this has become pretty apparent to me (and hopefully you as well) because over the last few days we have seen some turbocharged daily returns, making our investment balances look a little better.

Yes it’s true that I recently said goodbye to R300k. But I just checked my investments, and I am now saying hello to R100k. Please come in and make yourself comfortable, your friends will be arriving soon!

Till next time, Stay Stealthy!
 - ~ - ~

I know this is very US based, but I can't imagine it to be that different in South Africa (or anywhere else in the world for that matter).

If you enjoyed this post, it has been scientifically proven that you have a 96.78% chance of liking future posts.
Don’t argue with statistics, sign up to the mailing list and get the newest stuff delivered to your inbox!