Tuesday, October 1, 2024

The #1 Secret to My Investing Success

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The #1 Secret to My Investing Success

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

"You have bigger cojones than me."

That's what one of my buddies told me this past August as the market was sliding. He and I were discussing investing, and I mentioned that I had put some money to work.

"I don't know when this sell-off is going to end. I'm too scared to buy right now," he added.

I had no idea when the market would stop falling either. But there's one factor that has been more responsible for my investing success than anything else, and I wasn't about to abandon it just because of a sell-off.

Discipline.

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The key to investing success is not necessarily picking the best stocks - it's how long you stay invested.

Over the past 20 years, seven of the 10 best days in the market came within 15 days of one of the 10 worst days. Missing out on those 10 best days would've cost investors an astonishing 4.2 percentage points per year of performance.

If you had invested $100,000 in 2004 and let it compound for 20 years at 10.2% per year (the average annual return of the market over that span), it would've turned into $697,640. However, if you had missed the 10 best days, you would've earned just 6% annually and made only $320,713. That's a heck of a difference.

Chart: The Danger of Missing the Market's Best Days
View larger image
 

I try to stay disciplined in most areas of my life, but I'm not perfect. On occasion, I'll eat so much that my stomach hurts, or I'll go down some internet rabbit hole while I'm supposed to be writing (why can't Hall and Oates just get along?).

When it comes to investing, I use three key strategies to stay on the straight and narrow.

Find Out My Top 3 Tips for Disciplined Investing

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