This week is the 120th Rule Breakers podcast, and as Motley Fool co-founder David Gardner looked back, he realized he's covered a whole lot of subjects in those shows. More to the point, with all those episodes behind him, there are some areas he may not have covered in detail in a while. So he's getting back to basics with a set of ideas he thinks any Foolish investor ought to take for granted -- because he's not taking it for granted that everyone knows them.
In this segment, he goes straight to the numbers at the heart of the long-term investing philosophy: Markets rise more often than they fall, so to capture the most profit, get in and stay in.
A full transcript follows the video.
This video was recorded on Oct. 11, 2017.
David Gardner: Principle No. 3 that I hold to be self-evident [I hope you do, too, because it's just straight data] is basically one year out of every three the stock market drops on average. Sometimes those years happen in a row, but often the average bear market, when it hits, is about 12 to 18 months. Significant bear markets -- where we would actually use that phrase as opposed to just a down year -- might sometimes bring those down years into a pair, even maybe three in a row, although very rarely anything like that. Even bad, long markets have some up years here and there.
The good news is that two years out of every three the stock market goes up. And so as I have been wont to say in the past, the only market timing I ever do ... I'm somebody who will never predict the stock market. I don't think I'd be good at it, I don't think anybody else is, and I don't think it's worth your time or much thought, frankly, because it's never going to be much more than a coin flip.
But that's why, as I was saying to some Motley Fool ONE members in Charleston a few days ago, whenever anybody asks me where the market's headed over the next year, I always say, "It's headed up. I think it's headed up." And I'll be the first to say it might drop. One year in three it does, but by simply saying I think it's headed up, I get it right two-thirds of the time which, if you look at your market timers you'll see I have an enviable track record with my market predictions. You can, too. Feel free to copy.
But now looking at the down side of market drops. Yeah, markets drop. One year in three it doesn't feel good to be an investor, so you have to be ready for that. We haven't had a down year of any real meaning over the last five, six, seven, eight years, so by no means am I predicting the market will go down. In fact, I think the market's going up in the next 12 months.
I don't know about you, but I can tell you at some point in the next few years, the market will drop and you need to be ready for that. You need to understand that that's how it works. It could be nasty. It could be rather mild. It might happen quickly. It might take a while. No matter what, always expect that the market can and will drop and you need to have, as part of your own resilience as an investor [which is going to be point No. 5, but we'll get there in a sec] to be able to recognize that's going to happen and not be freaked out about it.
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