We all know the work of investing legends Warren Buffett, Ben Graham, Peter Lynch, and Philip Fisher. Some of us might even know the work of John Neff, Shelby Davis, or Hetty Green -- three lesser-known investors who also can be considered legendary.

Now for the tricky part. How many legends can you name who were successful market timers?

Trick question
You probably can't think of any. I know I can't. Just about all of history's greatest investors continued to look for stocks through bull markets and bear markets, through wartime and peacetime, through thick and thin.

And today, there certainly are times when they can't find as many bargains as they like, and have more cash sitting on the sidelines than they prefer. But none of them is trying to call market tops or bottoms. They simply stay invested in the companies they like, and they buy more if they find any values. Buffett, for example, still bought companies for his Berkshire Hathaway throughout the 1990s bull market, and even though he believed the market was overvalued near the end of the decade, he continued to hold great stocks such as Coca-Cola (NYSE:KO) and American Express (NYSE:AXP).

So make no mistake, you don't need a market bottom to begin investing. One great example of this unfolded in the pages of the Motley Fool Stock Advisor newsletter, which published its first issue in early 2002 only to watch the market drop 30% during the next six months.

If you'd known a decline of that magnitude was coming, you'd probably have stayed out of stocks entirely, right? It's certainly reasonable to think that way. But while the newsletter's debut was a case of bad timing, the returns since then have been instructive. Members who bought each of Tom and David Gardner's recommended stocks during the 30% fall are up an average of 121% on those investments, while equal amounts invested in the S&P 500 would have returned 23%.

Keys for non-timers
What are the lessons to be learned from this? Tom says you don't have to worry so much about the inevitable rising and falling of the general market if you:

  1. Look for high-quality companies with world-class leadership.
  2. Demand a good price before buying.
  3. Let your winners run, allowing them to potentially rise numerous times in value over the years (possibly even decades).

And to these three I will add just one more: Reinvest your dividends if at all possible. As Jeremy Siegel pointed out in The Future for Investors, reinvesting buys you more shares at higher yields if stocks fall, and it helps your returns rocket ahead when the market recovers.


Dividend yield

Annual return

$1,000 invested

Pfizer (NYSE:PFE)




PepsiCo (NYSE:PEP)








Kroger (NYSE:KR)




S&P 500




Source: Jeremy Siegel, The Future For Investors.
*Names as of 2003.

These stocks were among the 20 best-performing S&P 500 members during Siegel's 1957-2003 study period, and all 20 were high-yielders. His most famous comparison showed that Standard Oil, now ExxonMobil (NYSE:XOM), actually gave better returns than IBM (NYSE:IBM) even though IBM performed better in virtually every growth category during that entire 45-year period. Standard Oil's average dividend yield was twice that of IBM's, however, and so the power of reinvested dividends trumped one of the great growth stocks of the 20th century.

Bottom line
There is one great truth in investing: The key to wealth is to continuously add money, month in and month out, through good times and bad. Whether you invest in index funds, managed mutual funds, individual stocks, or all three, you shouldn't be overly concerned with the macro situations that are out of your control. You just need to get in the game as soon as you can.

Tom and David practice and preach these principles every month in Stock Advisor. For all of you non-market-timers out there, try a special 30-day free trial to the service. Thus far the Gardner boys' recommendations have returned an average of 66% since the newsletter began, vs. 22% for the S&P 500. Give it a whirl . there's no obligation to subscribe.

Rex Moore has calculated pi out to 21 slices. He owns shares of Berkshire Hathaway. Heinz is an Income Investor recommendation. Pfizer and Coca-Cola are Inside Value recommendations. The Motley Fool isinvestors helping investors.