You Missed the Best Day to Buy

There was once a woman who prayed every day for 20 years that she'd win the lottery. Every single day. Finally, in despair, she said, "God, I've been a true and faithful servant and have lived an exemplary life. Why won't you grant me this one thing?"

"Look," said God, "at least meet me halfway -- buy a lottery ticket."

Buy the ticket
Similarly, in order to take advantage of the greatest long-term wealth-building machine available to us individual investors, you have to be in the market. And if the current craziness is keeping you away because you fear a huge drop, you're ignoring the advice of some of history's top investors.

In the latest edition of his book Stocks for the Long Run, Jeremy Siegel charted returns for a hypothetical unlucky investor who happened to invest at the absolute top of six major 20th-century market peaks. After 30 years, this investor actually accumulated four times more wealth in stocks than he would have in bonds, and five times more than in T-bills. For a 20-year period, he doubled the return for bonds. And that was investing at the peaks; with the market down over 40% in the past year, we're in a deep value situation, with plenty of bargains out there.

There's more where that came from
Consider the late John Templeton, founder of Templeton Growth Fund, and widely regarded as one of the best investors of his generation. His advice about getting into the market is simple: "The best time to invest is when you have money. This is because history suggests it is not timing which matters, it is time."

Our own David and Tom Gardner, who've beaten the market by a tremendous amount in Motley Fool Stock Advisor, also eschew timing the market. "The best time to invest was yesterday," says Tom. "The next best time is today."

So even though the tongue-in-cheek title of this article implies you've missed your best chance, you can see that you really haven't. If you've got money you won't need for five years or more, just get in the game as soon as you can.

Still need convincing? I looked back 15 years, specifically searching for companies that had experienced a big one-year gain. Surely, many investors back then were worried that stocks were too rich and ready for a great fall.

Well, a gnarly bear market did start up in 2000, and yes, these stocks fell. But despite their tremendous prior one-year gains, and despite two big bear markets (including the current one), their returns have been solid for those who held for the long term.

Company

1993-1994

1994-Present

Intel (Nasdaq: INTC  )

31%

296%

Harley-Davidson (NYSE: HOG  )

43%

220%

Best Buy (NYSE: BBY  )

177%

877%

Charles Schwab (Nasdaq: SCHW  )

33%

1,179%

Applied Materials (Nasdaq: AMAT  )

111%

334%

Maxim Integrated Products (Nasdaq: MXIM  )

83%

340%

Caterpillar (NYSE: CAT  )

62%

145%

S&P 500

5%

144%

There are no guarantees
We're in another scary period, but history shows that if you can find superior businesses with good management, hold for the long haul, and add new money regularly, you will rarely be disappointed.

That's the advice David and Tom give to their Stock Advisor members, and they help them not only with new recommendations each month, but also with the top five stocks to buy right now. They've been at it a long time, through bear and bull, and their average recommendation is beating the market by 40 percentage points.

Right now, a special no-obligation free trial will give you access to all these stocks and more -- including 10 best buys for the current market. Here's more information.

This article was first published Jan. 25, 2008. It has been updated.

Rex Moore thinks now is a good time to buy stocks. Best Buy and Charles Schwab are Motley Fool Stock Advisor selections. Best Buy and Intel are Motley Fool Inside Value selections. The Fool owns shares of Best Buy and sold puts on Intel. This information is brought to you by the Fool's disclosure policy.


Read/Post Comments (8) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 30, 2009, at 8:53 AM, pondee619 wrote:

    " If you've got money you won't need for five years or more, just get in the game as soon as you can"

    But, advocating against putting money needed within five years into the market made Cramer a dangerous maniac. I read that on the Fool.

    Are you a dangerous maniac?

  • Report this Comment On April 30, 2009, at 11:40 AM, TiltnSpill wrote:

    I fail to see your argument here Pondee.

    How does advocating against putting money needed WITHIN five years relevant to put money in you won't need WITHIN five years?

  • Report this Comment On April 30, 2009, at 12:15 PM, pondee619 wrote:

    mighty...:

    According to the following:

    By Nick Kapur

    April 28, 2009 |

    "Whatever money you may need for the next five years, please take it out of the stock market right now, this week. I do not believe that you should risk those assets in the stock market right now."

    -- Jim Cramer, Oct. 6, 2008; S&P 500 at 1,056.89

    "Nearly seven months ago, and thanks in no small part to the statement above, I concluded that Jim Cramer was a menace to investors."

    therefore:

    Jim Cramer is a menace to investors for advocating that money needed within five years not be in the market.

    According to Rex Moore:

    " If you've got money you won't need for five years or more, just get in the game as soon as you can" thereby making the same exception for money needed in five years.

    If Cramer is a menace for advocating leaving "five year money" out of the market, Rex is also, as he also leaves "five year money" out of the market.

    I don't fault Rex, five year money should not be in the market. But, there is a recurring article on the Fool that states that holding such a belief makes you a menace.

    If Cramer is dangerous, isn't Rex, also?. Or, maybe Nick, will stop mindlessly reprinting his article.

  • Report this Comment On April 30, 2009, at 12:32 PM, Streelsh wrote:

    It is true that over the long run, equities outperform fixed securities and, I believe, equally true that only funds that you don't require should be invested. However, equally important is stock selection ( I do my own stock selection - and while I have had my share of losers, I have done, however, quite well.

    I look for "value" and tend to focus on large-cap leaders in fields that are growing and I believe are under-valued( Leaders are able to raise prices sooner and lower them later and tend to be better capitalized). I am not afraid to dump losers merely because I have "paper losses" if I think the trend is down nor hold onto winners

    I have always avoided the following industries:

    AIRLINES because they are labor intensive, capital intensive and energy intensive AND because they are so competitive usually fail

    BANKS and BROKERAGES : Even though I am an accountant , only because I cannot adequately figure out how "good" their loans are ( and how accurate their reserve for bad debts are) and since loans receivables constitute the lion's share of their assets I really can't figure out how strong they are financially

    TELECOMMUNICATIONS:

    I know alot of people who switch phone and internet companies ONLY based on price. Since intense price competition narrows profit margins and since capital investment can be relatively huge I stay away from that

  • Report this Comment On April 30, 2009, at 2:27 PM, shaolintrader wrote:

    The best day to buy was some day back in October 1987. What an insulting header!

  • Report this Comment On April 30, 2009, at 5:58 PM, Varchild2008 wrote:

    You'd have to be immortal but the best day to buy would have been U.S. Steel's IPO.

  • Report this Comment On June 15, 2009, at 10:56 PM, bpa169 wrote:

    And how much money of your own have you invested Rex Moore???

  • Report this Comment On June 15, 2009, at 11:09 PM, QwertyHero wrote:

    Someone explain to me why Cramer is a bad guy for telling people to take money out of the market before the greatest decline in stock prices in 80 years?

    I've been trying to wrap my head around that one... Seems to me like he saved a lot of people a lot of money. They got the money that they needed out - kept what was disposable in...

    I just don't get it...

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