You don't have to beat the market every year to beat the market
*in the long-term. 😅
There seems to be a common misconception that you have to beat the market every year in order to “beat the market”.
This is not true.
You can underperform the market for years, actually, and still outperform the market over the long term.
Do you think Warren Buffett, Benjamin Graham, Ray Dalio, or many other superinvestors beat the market every year?
Definitely not.
But, they have been able to beat the market over the long term.
Let’s look at an example below.
In Year 1, the market was up 42% and you were down 3%. Everyone else thought you didn’t know what you were doing (truthfully, they thought you were an idiot for not buying into the most popular tech stocks).
You didn’t cave — you still had belief in yourself.
In Year 2, Mr. Market realized he was a bit too optimistic in Year 1, and the markets correct for a 15% loss. Since you weren’t involved in the speculative stocks and you bought companies with true fundamental value, you had a fantastic year in Year 2 — up 33%.
In fact, you underperformed the market in 6 out of 10 years, yet you still beat the market.
The numbers in the example are completely random and made up, but the principle still holds true.
Don’t get so caught up in the day-to-day, month-to-month, or even one-year returns. Focus on the long-term. Anything less, and you’re not truly investing, you’re speculating.
This newsletter was inspired by a few pages in William Green's book Richer, Wiser, Happier that I read last night. It was a story about an investor I had never heard of before — Jean-Marie Eveillard. It was on pages 88-91 of Green’s book. I highly recommend you check it out. The lesson taught in those 3-4 pages is invaluable, especially in today’s market.
All the best,
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