The skeedaddle. That’s what soldiers called it in the Civil War. Troops shocked by a surprise attack (like Stonewall Jackson at Chancellorsville) would panic and run.
President Lincoln often talked about this in the context of a soldier’s legs being in control of his body rather than the brain.
So, too, in the investing world. There were a few that did panic on the week of Sept. 15 through 19. They couldn’t take the pressure. They feared the worst and let fear affect their good judgment. They skeedaddled.
Let’s face it, these periods are no fun. The wrenching we get in our stomach is something no one looks forward to, but it is part of life. We must learn to think clearly and logically when events around us are chaotic.
Emotion is probably the hardest thing for us to control in our lives, whether it is in the stock market, or anywhere else for that matter.
That is why the “stayers,” the long-term winners in the market, are more often the more relaxed, boring types.
The excitable types that you often see on CNBC (that make for good entertainment) very often get caught up in the moment and make absurd statements that in retrospect are ridiculous.
One thing we suggest investors do is pick groups that may seem boring at first glance, but are in fact the best place to build wealth over the long haul.
Food & Beverage – Many investors shun this area because it does not have pizzazz, and we readily admit that. But you must also face facts – and the fact is that many food stocks are great long-term holds.
We can name a bushel basket full: Coke, Pepsi, Hershey’s, Wrigley’s, Smithfield Foods, Heinz, Tootsie Roll and many more – all have been wonderful stocks to buy and hold.
Look at the events of Sept. 11. Now look at the food business. Has anyone stopped eating or drinking since then? How have your eating habits changed since then?
Too many of us seek out immediate “gratisfaction” in the stock market when, in fact, we should be seeking stability.
That is a hard lesson for all of us to learn. In my early days of investing, I would have pooh-poohed any suggestion that I buy Wrigley’s. Why? Because it was some boring chewing gum stock and hey, I’m a smart guy, I can do better than that.
And that is just the point. The stock market is a place where you get rich slow, not fast. If you are investing in the market and you have still not learned this important lesson, then you still have a ways to go.
Right now, if I were a stockbroker and I wanted to get you to “bite” on something, I would be much more successful if I told you some neat story about some up and coming company that was “going to be the next Microsoft”.
It’s much easier to sell you this type of story than it is to “sell the sizzle” of owning a chewing gum stock.
The greatest friend you as an investor will ever have is compounding. And it doesn’t take big numbers to accumulate wealth. It takes patience – lots of it.
Take a figure like $25,000 and compound it at 15 percent a year for the next 25 years. You will be amazed at what that $25,000 will grow to. Go ahead, do it, and see what you get.
Of course, the $64,000 question is: Can you build a portfolio that can grow by those numbers? We think you can, but you have to own the right stocks. That is the key.
Very few stocks stay good for a very long time.
Even the very best stock, sometime, is going to drop 50 percent from its high, and that is hard to take. What you have to have is the patience and faith to be willing to ride-out the downside, because you believe in what you are doing.
Surprisingly enough, in this business, that means sticking to some very basic industries and ignoring all the meaningless noise that we hear everyday.
Cheap stocks are not good. Good stocks are never cheap.