Why You Should Always Be in the Stock Market (Even Now)

Keith Fitz-Gerald Oct 22, 2014
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On the heels of the worst volatility in nearly 20 years, and more “crash talk” than we’ve heard maybe ever, it’s starting to look like a smart time to hit the eject button and get out of the markets altogether.

In fact, that’s probably the most common question I’m hearing these days:

“Do I really want to be in stocks right now?”

Believe me, I get it. Folks are emotionally shattered from seeing their wealth cut in half twice – once in 2000 and again in 2007-08. That’s why 55% of Americans have no money in the stock market at all, according to a Federal Reserve Board analysis from last year. I think the number is actually higher, because of the anecdotal evidence I gather on a daily basis.

That means hundreds of millions of people are missing this blindingly simple tactic that drives our Total Wealth strategy.

If only those people would look at this chart…

Take a look at the Dow Jones over the last 114 years.

Despite two world wars, multiple invasions, presidential assassinations, the Cold War, hot wars, recession, depression, and all manner of events that no doubt seemed “catastrophic” at the time, it continued to push higher.

Since 1900, it rose a staggering 24,285%.

Why did it keep going up? Because the companies that comprise the Dow continued to make products, provide services, and grow earnings. It’s that simple.

There are more people on this planet every single year. There’s more money being created. There’s more velocity. Capital is a creative force, too. As more wealth is created, investors joining the party are willing to pay increasingly higher prices to go along for the ride. It really isn’t more sophisticated than that.

That’s why “always own stocks” is another Total Wealth tactic.

Many people don’t think of this as an investing tactic. But truth be told, it may actually be the most important tactic of all, because if you don’t own stocks you can’t participate in what I think of as “the upside of humanity.”

The Power of Owning Publicly Traded Companies               

Think about this for a minute and ask yourself…

…do you go to the store?

…do you buy stuff?

…do you keep your lights on?

…do you need food?

…do you need medicine?

When you own a company’s stock – whether it sells burgers or banking services or biopharmaceuticals – you are an owner in an enterprise that exists solely for the purpose of making money, and you’re tapping into the earnings of that company. They have a common goal, and that’s to provide great returns to investors. And, over time, most do.

Owning stocks is not a matter of whether you “like” the headlines or not, only whether you’ll make money from doing so. Over time, the answer is clearly yes.

Sure there are going to be speed bumps along the way, but even those are great buying opportunities – at least if you believe in “buy low and sell high” like I do.

Obviously, there are considerations that have to be made for your age, your risk tolerance and your objectives, but those are really shades of grey that depend your situation.  Not one of the factors I’ve just mentioned negates the argument itself.

And that argument is precisely?

…You ALWAYS want to own stocks, because that’s the best way to tap into the “upside of humanity” and build your personal financial dreams faster.

Especially today. Right now.

You may be thinking “there’s got to be a catch.” I hear you… That’s a perfectly normal emotion and a common one, too especially lately.

It’s not too good to be true – you always want to own stocks even if you’re one of millions who have come to the conclusion that big banks are a four-letter word and there’s a near total lack of adult supervision in Washington.

How do I know this is true?

The same way you do. If companies were not creating wealth, the economy would not be growing.

Simple as that.

But don’t take my word for it.

More Proof from the Brightest Minds

My reasoning is backed by some of the brightest minds in the business and piles of incontrovertible academic research backed by reams of data.

Some of my favorites include Wharton Professor Dr. Jeremey J. Siegel’s work in his best-selling book, Stocks for the Long Run which is now in its 5th edition. My copy of Benjamin Graham’s treatise, The Intelligent Investor, is so dog-eared that it belongs in a used book store reject pile. First published in 1949, it’s as timeless and applicable today as it was then. There’s also What Works on Wall Street by James P. O’Shaughnessy. It’s one of my favorites because it’s an unambiguous look at more than 90 years of results based method research and current statistics.

Admittedly, the best theories are worth squat if they don’t work. So I’ve made it a point over my career to seek out the greatest investors of our time in an effort to learn what’s helped them turn modest investments of a few thousand into billions over the years. And have been fortunate enough to meet many of them. Names like Sir John Templeton, Warren Buffett, Jim Rogers, Peter Lynch, and Mark Mobius.

Or consider the words of Austrian economist Joseph Schumpeter who noted in his 1942 work, Capitalism, Socialism and Democracy:

The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. (p. 83)

What Schumpeter was driving at is the self-evident rationale for the continuous development of new products, new services and the pursuit of profit – growth by any other name. He knew – and I agree – that growth is an evolutionary process that continually creates increasing amounts of wealth.

That’s why what you really want to be asking right now is now “Should I be in stocks?” but “Where should I put my money to get the biggest bang for my buck?”

And I’ll be back with a very exciting new answer to that in a few days.

Best regards for great investing,

Keith

18 Responses to Why You Should Always Be in the Stock Market (Even Now)

  1. shaun says:

    I do agree ! Thank you for the letter !
    Sincerely,
    Shaun

    • George Wakelin says:

      Agree. thought your “even now” comment was going to address trading stock down for profit. Am ready to start to play with CFD’s (down) but would prefer your suggestions than me guessing amateurly.

  2. Ernie says:

    Risk taking is the backbone of our country economy.
    no risk….no gain.
    know risk…know gain.

    Ernie

  3. Roman says:

    Should the market retreat by 50% in the next 6 months, it would be of little comfort to the investor nursing the loss, to suggest that the market will be substantially higher in another 114 years. As Lord Keynes said: “We are all dead in the long run!” I only wish that some of his purported disciples let him rest in peace.

  4. Dennis Pollack says:

    Hey Keith.
    Nice Job!
    Hope everything is going well.

    Dennis Pollack

  5. Ben Krewsun says:

    Keith,

    Well presented. I have just entered the market and I believe it is the best move that I have made since when I had started my own business and have since retired. I never before trusted the market and felt it to be too complicated. Yet, after seeing that, no matter if the market collapses it will always recover. Money begets money. By the way, I also have learned “not to put all my eggs in one basket”. Thank you for the encouragement.

    Best regards and looking forward to more,
    Ben Krewsun

  6. stephen thomson says:

    What utter nonsense. And how do you explain the Japanese stock market? What would “you should always be in the stock market” have done for you exactly?

    The key to making money from the stock market, and indeed any form of investment, is knowing WHEN to be in stock markets and WHEN NOT! There are times when stocks are expensive and times when they are not. History proves only that you have a better chance of making money when you buy cheap and sell when prices are high.

    While it’s true that anyone owning stocks should really be looking at a time horizon of a minimum of 5 years, the Japan situation demonstrates why your article is complete hogwash. You should be ashamed of giving such advice.

  7. Dan says:

    Perhaps the US stock market behaves like this (so far). However one good look at the Nikkei 225 might make you pause. It seems like the same ideological trap as real estate prices are not going to go down of the pre crash days.

    • Donald Rogers says:

      Stephen and Dan – obviously you guys have never heard of dividend reinvestment and the power of compound growth? When used with proper risk management, there has been plenty of money made in Japanese markets. How do I know? Because I live here and my portfolio is in better shape than ever.

      Keith’s absolutely right.

  8. bob says:

    If you are not in the market.where willyou put your money?Bonds? You’ve got o be kidding.Think real estate is safer? Please!.Gold and silver are going nowhere.You need the market.No if’s ands or buts.

  9. H. Craig Bradley says:

    Interesting. It has recently been reported that a still high 35% of households still have some money invested in stocks or stock mutual funds (the market). Moreover, the high was 39.5% of households invested in the stock market back at the last peak in 2000. So, the percent invested has not come down as much as one might assume, despite two brutal bear markets. The naysayers are still saying “Crash” and ” Buy Gold”.

    SWING FACTOR

    Like a broken record, Gold Bugs and Market Doomsday artists never change no matter what the market is currently doing. Their one tool is fear. Its fine to buy some gold as a hedge, as you previously recommended for bond funds at a 1:10 ratio using GLD, for example. You also pointed out that studies have shown that gold does not protect from inflation in the long run, but from unanticipated crisis or panics which do reoccur randomly now and then.

    I think the big change today is generally more pessimistic attitudes by many people towards their Federal government, political leaders, and the stock market. Its “throw the baby out with the bath” syndrome sometimes. These negative investor feelings are really the swing-factor in market behavior, not necessarily “fundamentals” or even earnings. Foreign capital flows into or out of the U.S. markets are a more dominant market force of late, as well.

  10. Ellis P Pascual says:

    I tried to buy 100 shares of SBOTF (Stellar Biotech Inc) at Chase Brokerage. I just found out, there is no freedom in this country after all. One can’t buy SBOTF through them just because it is classified as a penny stock company. Where is the so-called democracy in this USA? It’s nothing but a farce. The stupid rule should be changed. Anybody has a smart solution to the problem mentioned?

  11. Dale says:

    I really enjoyed this article Keith. The more I realize how rapidly the world is changing and the challenges that lie ahead, the more I can appreciate the opportunities the stock market provides. But was really impressed with this article and just wanted to say thanks.

  12. VIX tricks says:

    Rah! Rah! Rally! Really? 114 years of inflation makes everything more expensive. Spin it the way you wish. But in my book this FED induced -FED fear rally must make it’s creators money. The unexpected, led to slaughter, coast is clear, investors who think the future is mapped out by the past will pay the bills the masters put on them.

  13. Ron says:

    I don’t know anything about picking stocks, but I am up 29% since September 2013.

  14. Dinker Waghmarae says:

    Yes,one needs to be in the stock market,but as part of a portfolio that contains real-estate and cash as well.
    Dinker Waghmarae

  15. E. Greene says:

    Strictly my opinion, however I do know that if my Grandfather had bought 500 shares of Coca Cola (when I was born)and left me 100 shares of that stock to have and to hold until now, I would be even more wealthy. “A good man will leave his children’s children an inheritance” (Book of Proverbs) .

  16. Marc says:

    How do I get “Ultimate Trailer Stop” that Keith spoke about?

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