Close Your Eyes and Invest

The Wall Street Journal

June 26, 2008 3:11 p.m. EDT

Close Your Eyes and Invest
June 26, 2008 3:11 p.m.

Wall Street has just plunged another 2%. It's now down nearly a fifth from last year's peak. Other markets around the world are in a tailspin too.

My apologies to all those who already know this stuff, but a surprising number don't and at times like this it bears repeating. The further share prices fall, the better they become as an investment.

Are you under 60 and saving for your retirement? Are you hoping to build up enough money to put your kids through college, or to look after your parents in their old age, or even to leave something behind for the next generation?

Pretty much everybody fits one or more of those descriptions. And if you do, this is the time to find some more money to put into the stock market.

Of course it's only the place for long-term money, not cash you will need next year.

But by the nature of mathematics, a stock market that has fallen by 20% is going to produce 25% better returns.

Successful investing isn't easy, but it is simple. Buy low, sell high.

It doesn't take a genius. It just takes discipline.

Too many people jump into "hot" stocks and "hot" markets and "hot" funds just after they have risen a long way. Call it buying high.

Then, when the inevitable happens, they panic and dump their shares. Call that selling low.

No wonder the average ordinary investor has actually underperformed the market by a long way over the past few decades.

It shouldn't happen. The stock market is open to all and there are simple ways to make excellent money.

The most obvious is that you have to be patient. Anyone trying to get rich quick is headed for the poor house.

Yes, the market may fall further.

We are culturally alert to the risks of a stock market "crash." But we underplay two bigger risks. The first: Not having enough money for retirement. The second: Inflation. Sticking money at the back of the sock drawer is not going to get anyone to a comfortable old age, and it will lose half its value every fifteen years or so.

Write to Brett Arends at brett.arends@wsj.com1

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