10 Consistent Things About the Stock Market

Mr Warren BuffetThe US Stock Market continues to record all-time highs with just over a month left to go in 2014. Here are ten facts about the stock market that you should know which have remained the same for over 150 years. 

1) The Stock Markets will go up and go down but will always go back up higher

It will go up! (AKA “Bull Market”) and it will go down!!! “Crash” or “Correct” as the general media will call it, or “Bear Market”, and you cannot do anything about that. FACT: It does correct and go down, but it has always gone much higher each time for over 150 years. Knowing this, intelligent investors always keep some money in the stock market, they never do the as foolish investors do and bail out completely. 

2) The Five Percent Group

Despite the fact that we are living in one of the most opportune economic times in the history of human time on earth, only an estimated 1-5% of people still will do well in the stock market. This has been true for over 150 years. And for reasons that I really cannot explain, this will most likely remain true for the next 150-plus years.

3) Mixing Emotion and Investing
Most people invest using just emotions or gut feelings. Using this method, they will only invest when the market is doing very well. When they feel good about it, they buy stocks and when they feel bad about it they sell.

People always asked me, “How do you feel about the stock markets?” And I always reply; “The stock market has nothing to do with emotions or feelings.”
– Sherwin Presley Brown

Mixing emotion with investing in the stock market is a deadly combination. It is a ticking time bomb; sooner, rather than later, your emotion will get in the way, and you are going to lose your hard-earned money. If you invest with emotions, you are guaranteed to make foolish mistakes by buying at the wrong time and selling at the wrong time.

4) Chasing Hot Stock Tips and only imagining the stock market can only go up!

If you are one of those people who invests by watching the news, who thinks that a stock should only go up and find yourself checking your stocks every day hoping they will go up and cannot imagine your portfolio going down by at least 20%, then you are going to be one of the 95% who always loses money in the market.

These are same people will sell off at the bottom. They will pay $100 per share for Apple stock and, because of emotion, will sell it at $55 per share. This is always very surprising to me that these investors will wait on the sidelines for a few years until the media says how well Apple is doing. They get upset at themselves and say; “I should have never sold,” and buy back the stock at $150 per share. THEN, when it drives another 40% down to $90 again because some TV analyst says something bad about the stock, they will again panic and sell off again. I have repeatedly seen otherwise very smart professional people do this over and over and over. 

5) Marketing Gimmicks and Tricks Used by Mutual fund companies and others  

Wall Street, investment and brokerages firms, banks and the most clandestine of all Mutual Funds companies, will always come up with some new marketing gimmick and tricks to find a way to legally scam away some of your money. Whether it is done with fees, hidden expenses, commissions, somehow they get your money. You have seen all those slick ads; they are all designed to lure you in to take some of your money…

About five years ago, it was the new target dates, target allocations  and lifelines funds, for example, Target Year 2010, Target2020  75/25% Retirement date, Target Dates Series  2030,  Target  retirement 2040, and so on. Now the new exciting  gimmicks are ETFs! 

If you pay attention, you will notice as soon as one fund companies comes up with  a new marketing gimmick, the rest follows immediately.  

6) It will never go to zero – Guaranteed
The Stock Market as a whole will never go to zero. Why you ask? Because, there is usually someone one buying the very Apple stock you bought for $150 and are now selling off at $90 per share.

The people buying are the intelligent investors who always sell off some in happy euphoric times as we are currently  experiencing  in late 2104  . That is; they sell off enough to take out their original investment/principal plus some of their gains, but they always leave some invested. This is known as a “sweet spot” in investing.

For more on this, please see the chapter entitled: “The Investment Sweet Spot: The Place Warren Buffet Loves and Where You Want to Be,” from my latest book, “Simpler, Safer Investing: How NOT to Lose Money, Over 110 Years of Investing History Cannot be Wrong.”

Again this has been going on for over 150 years and will probably never change. 

7) Timing the Stock Market 

You and even the investment geniuses and gurus such as yours truly can never time the market by figuring when to get in and get out with all your investments.

One of the richest persons the world, Warren Buffet, who is now over 84 years old and has been investing since he was 12-years-old put it best.

The Stock Market is designed to transfer money from the active to the patient.” –Warren Buffett 

Is Mr. Buffet a smart person? Yes, but he is using the same tools that we all have at our discretion: time and patience. He has never written a tell-all book about what is secrets are, but if you look at his holdings it is very easy to figure out what he does. 

He used time, and he is very patient. Even though it can take years, he will wait until the 95% of the market is panicked, sell off their stocks that they bought at a very high price and are now selling off at 40% or less of what they paid. 

Buffet never chases or buys the hot stock that the 95% of the crowd are buying because of one reason: It is going UP!  He never buys based on rumors or hot tips! 

What is clearly in his portfolio holdings (public info for all to see) are companies that produce and sell goods and services that we and tens of millions of people ALL MUST USE and CONSUME EACH DAY, like food, insurance, gasoline, and freight trains, etc. 

For example, people send a check to their gas and electric companies every month for over sixty years and never stop and think, “Wait a minute! I am not the only one who is forced to send them a check. All my neighbors and friends and the other millions who live in my state, plus all the businesses and government offices in that state, must pay, too!” 

Again, this has been going on for over 150 years and will never change. 

8) It takes very little to start building wealth:

It does not take a lot of money to start getting on your part to financial success. Did you know that $40 invested in Coca-Cola in 1919 is worth over $11 million as of 2014? But, what I find remarkable is that they are one of the simplest companies if you stop and think about it. They basically sell three things (four, if you believe the urban myth that Coca-Cola is spiked with cocaine): water, sugar, and food coloring. 

Did you know that, just like your gas and electric company take the money directly from your checking account each month for their services, you can also have them take out a small amount (as low as $25 per month) of money so you can buy in this very same company? 

By doing this,  in 25 years, they will be sending you more money than you send them? 

This one  way, you can start buying shares of the company directly without any cost to yourself to invest in this company. 

9)  It gets easier over time to invest in the stock market

As technology continues to make our lives much better, is it also now much easier to invest in the stock market. Yes, it now takes one simple phone call or a few clicks on your computer. This was not common just 25 years ago—it was only available to less than 10% of us. But not anymore. 

The investment playing field is much more level in 2014. You can no longer use that old excuse; that it is too hard, and it is only for the rich. Time and patience are your best allies in getting wealthy in the stock market. 

10: The “I Will Do It Tomorrow Crowd,” the other 95%

No action on your part: The good news is that you are in the company of the other 90% plus of people who put things off for most if not all their lives. The bad news is that you will do nothing, and will end up having nothing just like them. 

Don’t be one of the many who fail to take action, change your life or the future of you family lives. Do something! It is a lot simpler than you think.

Just Do It! Yes, you can with only a few shares of Nike!  So the next time you pay $100 for a pair of Nike Shoes for your kid, make sure you Google them and call them up and tell then you want to invest directly in their company without having to pay any fee or cost. They will usher you to their Direct Reinvestment  Investment Program  Page better known as “DRIP.” 

Again, this calls for three good quotes by very famous people. Enjoy! 

1.    Try to save something while your salary is small; it’s impossible to save after     you begin to earn more. –Jack Benny

2.    A journey of a thousand miles must begin with a single step. –Lao Tzu

3.   Courage is being scared to death, but saddling up anyway. 

Sherwin Brown

About Sherwin Brown

Sherwin has been an entrepreneur since he was twelve years old. He currently teaches, writes, and speaks to people about how to improve and safeguard all aspects of their financial portfolios.