How To Keep A Long-Term Perspective In Stocks

(Video length 00:09:54)

In this video, I’ll show you how to keep a long-term perspective in the stock market.

I’m a believer in stock market systems, particularly my Signal system. However, no system beats the stock market in every time frame.

To work over time, a stock system needs to beat this:

[100-year Dow chart shown at 0:40.]

This is from Macrotrends.net. It shows that for the vast majority of the time, the goal is full exposure to stocks.

It’s why buy and hold works — but few will do it.

Why? Because sometimes the market does this:

[Chart of 1929 crash shown at 2:20.]

Looking at this, you think it’s best to avoid stocks at times. Wrong. It’s best to get buying big time.

Systems need to be ready for this, which means not reaching full exposure to stocks except after big crashes, but not reaching full exposure means missing out on the long-term rise of the last chart.

Our short-term perspective misleads us to miss out on the long-term profit power of stocks. It’s why bears have missed everything since the crash of 2008.

The long term is, well, long. We’re bad at it.

Momentum plans with great long-term performance have not beaten the S&P 500 in even one year since 2008.

My Sig system has lost to the market in past time frames. It’s done well this century thanks to high volatility, but a long enough rise would set it back.

When you think about it, what you’d really like is a market to go utterly sideways for 29 of the 30 prime investing years of your life, then rocket higher.

Everybody would complain along the way, though, wouldn’t they?

Find a plan that works in most time frames, and stick with it. Let periods of underperformance go. Keep putting more money in, and let the magic work.

The long term will contain many bad short terms, which will seem long at the time, but will disappear on the truly long time line.

Of course, most people will ignore this advice, but it needed to be said anyway.