Know when to hold them
Know when to hold them

I’ve had no end of debates with people saying that with stocks you should buy and forget. If you do that then over 10 or 20 years you will be showing a handsome profit. The post Cutting Losses shows just how improtant it is to limit your losses on the downside. Well Barry Ritholtz has linked to a chart that shows your return over a long period of time:

Stock Market Matrix: The Investment Triangle: Use the diagonal to select your start date; use the horizontal axis to select your “withdrawal” date. Where the 2 meet shows your returns: Red means returns failed to keep up with inflation; gray red is slightly above (0-3%); gray is 4-7%’ light green is 7-10%, while green is 10% plus.

Click here for large image.

The chart shows:

Historical averages can vary widely depending on their starting and ending points… After accounting for dividends, inflation, taxes and fees, $10,000 invested at the end of 1961 would have shrunk to $6,600 by 1981. From the end of 1979 to 1999, $10,000 would have grown to $48,000 .

“Market returns are more volatile than most people realize,” Mr. Easterling said, “even over periods as long as 20 years.”

It is a risky volatile world out there. There is no such thing as a guaranteed way to riches. Hard work and spending less than you earn increase your chances. But chance is still involved. With the best behavior in the world times may not suit you. I have no doubt there were lots of highly intelligent, thrifty hard working Jews who ended up in a gas chamber or shot. Not to mention Cambodians, Chinese or anyone anywhere the socialists have come to power. You have to love the left.

Good luck people. May the times suit you or you suit the times.