Legendary investor Jesse Livermore once said, “It was never my thinking that made the big money for me. It was always my sitting.” And he was right all the way long because the most important element to investing success is not the stock-picking ability but it’s time. The longer you’re invested, the more money you will make.
Some years ago, a Fidelity research conducted looked at its investor’s accounts to identify common patterns among the most successful investors. The result was ore than remarkable: The best-performing accounts belonged to investors who were dead or had forgotten they had accounts. Among the thousands of accounts that Fidelity studied, the ones that just sat there and weren’t touched had the best results.
The best thing to do as an investor is to put money into quality stocks and then do very little or nothing for as long as possible. Reinvest your dividends and add on dips when you have more money available.
Here is a simple calculation:
A $10,000 investment in dividend growth stocks with a starting yield of 4%, dividend growth of 8% per year and price appreciation of the historical average of the S&P 500 is worth
– after 5 years: $17,757
– after 10 years: $31,572
– after 15 years: $56,208
– after 20 years: $100,195
– after 30 years: $319,613
– after 40 years: $1,024,893.
That is the power of compounding and time.
Sven Franssen