Have I missed the chance to invest at the low (and what you can do instead)?
From the Mar 23 low of 2191, the S&P500 has rallied by about 30% to the 2900 area. You may be thinking one of a few things right now:
- Shucks! I have missed the opportunity to buy at the low!
- ARRGH! I should not have sold
- It's ok, the market will make another low. I will wait for it
Honestly, I have ZERO idea what the market will do in the short term and most of the time I don't really care. I used to care a great deal actually! But found it too anxiety producing and totally unhealthy.
What I want to encourage you to do is this.
Release all attachment to market movements, highs and lows.
Release all attachment to the need to buy the absolute bottom and feel like a hero.
I have seen many traders and investors buy the absolute bottom but not able to hold on to their gains anyway (me included!)
Let me give you a real example. I talk about O'Reilly (ORLY) a lot because it is such a great example.
During the GFC of 08/09, ORLY hit its low of $20 in Oct 2008 (5 months BEFORE the general market did in Mar 2009). Hint: Great companies will tend to bottom first and be on their way to recovery earlier than the rest.
By the time the SPX bottomed in Mar 2009, ORLY was trading about $33. Up 65% if you picked the absolute bottom!!!
What if you had missed that bottom and bought only at $30? What if you bought at DOUBLE the bottom price, only when it was at $40?
If you are like many people, you would have thought no way I am going to pay double!
Well, 10 years later, by end 2019, ORLY was trading at about $440, and even with this COVID sell off, it has recovered to almost $400.
Let's look at how you would have done.
IF (a huge IF!) you invested $10,000 and bought at $20, your $10,000 is worth $200,000 at $400 per share. An annual return of about 31.3% over 11 years.
If you invested $10,000 at $30 per share (50% higher than $20), your $10,000 is worth $133,000, or an annual return of 26.5% over 11 years.
The difference is about 5% per year but you would have to be dead right in order to nail the absolute bottom. AND, you would still have handily beaten the performance of the broader market.
My point is this. Instead of fretting about whether you have missed the boat and trying to time the entry, spend that energy looking for high quality companies available at a reasonable price.
Have you found some high quality companies lately?
Check out this free training video: https://bit.ly/JF-TrainingVideo01
#money #investing #The5000 #JoshuaFong #hope #christianinvesting #biblicalfinance #personalfinance