“How does anybody ever make money in the stock market?” my buy-and-hold investing father asked me. I couldn’t believe he was asking me this because he’s made a lot of money in the stock market over the last 30 years. It’s just that over the last decade, even the tried and true stock market investors are weary.
The way my dad has made money in the stock market is with two simple strategies. Save your money. Invest and be patient. First and foremost, my dad has a super-human power to save. He is a minister and chaplain and this does not add up to an enormous salary. But he has saved religiously (no pun intended) a little bit of every pay check he ever received. Most people cannot do this. It is by saving his money, that he has made money.
Secondly, once that money is invested, keep it put. This is something else that requires serious strength of conviction, particularly during 2001, 2002, 2008 and the first part of 2009. My dad asked “How does anybody ever make money in the stock market?” during 2008 when it felt like everything he’d saved was washing away. But he stayed invested and it has paid off. Despite the various market declines, the long term trend is up. For instance, when my dad starting investing in 1980, the S&P 500 index was at 107, in 1990 it was at 353. Now it is hovering around 1100, and these levels do not even consider dividends.
This is how you make money in the stock market. Even when things look grim, keep saving, keep investing. You can’t control the stock market (believe me, I’ve tried), but you can control what you do with your money. You can spend it or you can save it. Choose to save regularly. Choose to invest wisely, and stay invested. Be patient and give it time.
Harli L. Palme, CFP®