The famous quote by Bernard Baruch. Quoted in a post in March of this year, but it bears repeating as the stock market now seems more and more over-inflated.
There are two approaches to stock market investing. Investing to sell later, and investing for permanent income by dividend investing.
To invest to later sell means one must be constantly be on alert regarding market conditions. Unfortunately, investors and speculators alike recently seem to have a severe case of FOMO. Consider the following from a recent financial article:
“Getting out of a boom too early could cost you almost as much money in missed profits as getting out too late costs you in losses…. You often make the biggest money in a bubble right at the end.”
Investing with the idea one can get out at the last moment before a crash is delusionary at best, and at worst is to live in the world of anxiety and tension. One needs to know and continuously gauge the market, predict movements, anticipate changes, being constantly alert to all negative possibilities. While it may be appealing to some, it is not appealing to me. I’d rather sleep at night.
Let’s take a closer look at Bernard Baruch’s situation. As mentioned in the prior post, he realized that stocks were over-priced and sold most of his holdings in 1927 and 1928.
His advice was not to hold out to the last minute. ”Repeatedly in my market operations I have sold a stock while it still was rising – and that has been one reason why I have held onto my fortune.”
Will Rogers, American humorist, credited Bernard Baruch with saving his fortune by telling him to sell before the 1929 crash. Rogers later said: ”I did what you told me, and you saved my life.”
When stocks are overpriced, waiting for the last minute to sell is waiting too long. Everyone thinks thay will be smart enough, fast enough, wise enough to know the “right” moment when to sell. But in reality, it is by selling “too soon” is when people get to keep most of their gains. That of course is if one is investing for the purpose of selling.
The other method is to invest for income through dividend investing. In this latter case, the long view is to never expect to sell. Once one builds momentum, dividend income provides capital to make further investments through compounding. Thus income grows, and one can ignore most daily price volatility. It is the easy way to financial independence.
Experiencing FOMO or sleeping well? Let me know here.
Japanese artist Utagawa Hiroshige (1797–1858) was a hugely influential figure, and is considered the last great master of the ukiyo-e genre (“pictures of the floating world”). The wood block print of Mount Utsu, Okabe, was made in 1832. Courtesy Rijksmuseum. Netherlands.
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