Successful investing

Recently, the stock market took a pretty big dive. Plenty of people thought this was The End. The start of another Recession. You should have bought gold when Glenn Beck yelled at you. The market hit a peak in May, then dropped over 10%, and bottomed out on August 25. Since then, it's been steadily going up. How many of you panicked and sold?  In the grand scheme of things, this is an insignificant blip you won't remember. The stock market tumbled in October of 2011; how many of you remember that?

Let's pretend you regularly check your portfolio. Let's also assume you decided you wanted to take a vacation from it all and go camping or out to sea for 7 months or so, leaving the day before the market started tanking. During your time away, you had no internet access and couldn't check your portfolio. When you come back in December or January, you open up your account and notice it's slightly higher than when you left. Not by very much, but still in line with the gradual upward trend of the market over time. Nothing to see here. You shrug, close your computer, and go about your day as usual. And unless someone said something, you would have had no idea there was a small crisis in your absence.

That beard has got to go before you go back to work

The best investors keep their cool. They have a solid, SIMPLE plan, and know that stocks aren't something to buy and sell, but rather portions of ownership of real businesses. Businesses that produce things, that earn money, that keep the economy going. Good investors view stocks like most people would view investment real estate. Would you buy an apartment building just so you can sell it a year later and collect the profit? Probably not. Most people would buy it so they could collect rent and eventually have it as a source of passive income so they don't have to work any more.

In the same way, good investors buy business ownership for the long run. There are some people that try to make money by buying and selling stocks or real estate.  Most people that try to time the market end up broke.  A handful, either through luck or skill, do extraordinarily well, which fuel the dreams and ambitions of those trying to emulate them with little hope.  During the real estate bubble, millions of people bought properties with the goal of capitalizing on the market increases. Those who sold before the bubble burst were either lucky or smart.  Some people get lucky with risk. Statistically, you're probably not one of them.

Don't try to time the market. Buy businesses that your research shows will do well over the next few decades, invest regularly and hold on to them. If you don't know how to research a business, buy an index.  History shows us that the market returns a decent 8% return in an average year. Sure, there will always be someone making more money than you, but THEY AREN'T YOU. And chances are, if they're making lot more money than the market, they're taking on foolish risks that will eventually bite them in the ass. Steer clear of get rich quick schemes and keep it simple.