It’s a fool’s errand to expect no volatility. The famous quote … from J. P. Morgan still holds true: “It will fluctuate.”
So, the answer to the headline question Will The Markets Ever Stabilize? is: No, never. If the markets ever stabilize, then things are heading for a disaster. It is the nature of our capitalist world.
That all is why buying and hoping for a quick rise is foolhardy. The market is fickle, and cannot be predicted. Many people think they are investing but are really speculating and gambling.
Having a long-term horizon is much safer, especially for companies that make products in demand. Increasing dividends usually prove a company is a winner.
Earlier this year Lucy Harlow wrote: “Economic downturns are—or should be—a fact of life for investors…. But downturns eventually give way to recoveries. Only a fraction of firms will go bust. And equities are perpetual securities. The profits lost to recession can be thought of as an annual dividend cheque that got lost in the post and is not replaced. It hurts your wealth. But you are still entitled to payments stretching into the indefinite future. These account for most of a share’s value.”
That Warren Quote
Warren Buffett’s famous quote: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” He further said: “Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.”
There’s enough in Buffett’s pronouncement to guide any long-term investor. Having a ten-year horizon certainly can sober up any investor itching to spend money. You can read about an investor who applies a 30-year rule.
What to ignore
Tim McAleenan, one of the better financial observers, has put it this way: “In my opinion, the daily quotation is one of the biggest enemies of the average investor… we are not psychologically equipped to handle daily fluctuations, and we need to mentally train ourselves to think in terms of business performance rather than net worth.”
Infinite
There are an infinite number of ways to invest. There is no one right way that fits everyone. Everyone needs to find their own way. Find the best way for you. For me, I prefer to sleep and night, and to ignore as much noise as possible.
And what about you? You can let me know here.
The illustration “Yoshida Kenkô reading in his hut” is from 1684 Japan. It is the public domain. Courtesy New York Public Library.
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