The Best Investment Advice I Ever Received
 In September 2022 the Dow lost 8.8%, S&P 500 fell 9.3% and Nasdaq lost 10.5% |
Best Investment Advice I’ve Ever Received
Before we get started, I’m not a financial advisor. I’m not giving you investing advice. Your situation is likely different from mine. I’m simply sharing what I’ve learned, advice given to me, what I learned from reading studies and what that I practice. You should always consult a certified financial advisor to see if anything you read is right for your situation.
If you were watching your investment portfolio in the public markets the last two weeks of September of 2022 you were watching a market correction…
In September 2022, the Dow tumbled 8.8%, while the S&P 500 fell 9.3%. The Nasdaq lost 10.5%.
We all hate to have something we “had” taken away from us. That’s the mindset that brings the painful feeling when you look at your portfolio and, if your inclination is anything like mine, you wanted to sell so you didn’t lose more.
Let me tell you why I found this mindset to be wrong and how I’ve been able to shift it. And…
If it’s helpful to you, put it into action.
We will look at two studies and a piece of advice from one of the best investing books of all time that changed everything for me and…made me a lot of money!
Study 1
The research firm Dalbar conducted a study looking at the 20-year period from December 31,1993 – December 31,2013.
Remember that during this time there were hot market runs and down right recessions.
Overall during this time the S&P 500 returned 9.2% annually, but the average mutual fund investor averaged just over 2.5%. Barely beating inflation!
How is this possible?
Investors would have received a better return by investing in the three month US Treasuries. Never having to stomach the ups and downs of the market.
The President of Dalbar research explained what happened based on the data…
“Investors move their money in and out of the market at the wrong times. They get excited or they panic and they hurt themselves.”
This is otherwise known as “timing the market”. One of the most widely held beliefs that humans tend to believe they can do.
Some of it is perpetuated by money managers who get paid when you sell and buy, more likely…
I’d argue it’s an outcome of rationalizing the panic that strikes people that makes them sell in the first place. And…
The rationalization that they’ll get back in when the market starts to swing back up.
Would it be crazy to ask, “Why sell in the first place then if you’re going to get back in anyway”?
Now, if you need the money on a short term basis for a down payment on a house or something else, that makes complete sense.
But, for any other reason, it’s hard not to acknowledge it’s pure rationalization.
If you’re not convinced yet that “timing the market” is a terrible strategy on a long term basis, here’s the second study I promised.
Study 2
Fidelity conducted a study on the performance of its flagship Magellan mutual fund.
The fund delivered an incredible 29% average return between 1977 and 1990.
BUT, the average Magellan investor actually lost money!
How is this even possible?
I’m sure you’ve caught on to the pattern by now, but to confirm what you’re likely already thinking…
Fidelity showed that the average investor in the Magellan fund sold when the fund was down, scared they would lose more money.
When the “market was coming back” and the fund was up, investors would come running back and invest as the “market went back up and the fund’s performance increased”.
Reminding myself of these two studies has consistently kept me from selling in down markets like we’re experiencing right now.
However, there have been times, like the last two weeks in September of 2022, when that thought has crossed my mind.
BUT, what I’ve done is the exact opposite! Here’s why…
Advice from the best investing book of all time
I read the book recommended by Warren Buffet, and many other great investors, called The Intelligent Investor.
If you don’t own it, you should, and if you don’t read anything else other than Chapter 8 and Chapter 20, buying it is well worth the price of the book.
I’ve written several pieces on the invaluable lessons from this book along with the exact stocks, and other investments that have given me great returns, in the EDGE print newsletter.
There isn’t enough space here today to cover it all…
But, I’ll share with you one of the most powerful pieces of advice that I took from the book. I practice this advice and it’s helped me not fall into the trap of “timing the market.
The book advises to invest on a regular, ongoing basis.
REGARDLESS of where the market is at the moment.
Note, my investment horizon is on the longer side, 15+ years.
I invest regularly in two ways:
1) Setting my account to immediately re-invest any dividends we receive.
2) Buying with larger chunks of cash on down days. Buying in larger amounts gives me a little too much heartburn to put on auto pilot.
So when we have cash to invest, I wait for the first down day and buy.
Even if the next day is down, it makes me feel better that at least I didn’t “lose” as much.
If I had a shorter horizon, say in ten years where I was going to need the cash, I’d be more conservative. I’d look at dividend stock strategy investing in bigger, more established companies. Ones that might not give huge upside, but don’t have as much risk on the down side either. I’d also look at a bigger bond portfolio vs the almost all stock portfolio I have now.
The time will come for me to have a shorter time horizon, but until then, we’re heavy on stocks with our public markets portfolio.
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Shift Your Mindset from…
“Man, we are way down in the market. I’ve got to sell so I don’t lose money.” to
“Man, everything is on sale now, I’m going to get some real deals in my regular buying activity and it’s going to grow long term.”
Doing this will decrease your inclination to sell to avoid losing more and fall into the trap of missing out when the market comes back. It’s hard to argue with the research.
Also, I believe it traps our minds into the positive mindset.
If you buy on down days it doesn’t make sense why you should sell at the same time.
After all, if you are actually buying, how does selling make sense.
It’s hard to hold both “I’m getting something on sale, what a deal I just got” and “I’m selling to not lose more” at the same time.
It feels like the reward of buying and getting a great deal out weighs the decision to avoid a loss and sell. And it’s worked for me.
Other than readjusting things at the end of the year on a few stocks, I have not sold our core holdings over the last 15 years. All I’ve been doing is buying, especially during stock market corrections.
I hope what I’ve shared helps you panic less about your investments and makes you more money over the long term.
* SOURCES: The Intelligent Investor by Benjamin Graham, Dalbar research, BofA Merrill Lynch, MarketWatch, Money Master the Game, Yahoo Finance, CNBC Website.
Orginally written on August 22, 2022 for the EDGE email newsletter. Updated August 2, 2025