In his book – Learn to Earn, Peter Lynch explains that a twenty-year investment horizon is ideal for stock market success, allowing time to recover from downturns and accumulate profits.
Historically, stocks have returned 11% annually, turning $10,000 into $80,623 over two decades. Achieving this requires unwavering loyalty to stocks, treating the relationship like a marriage. Patience, courage, and discipline—not just intelligence—are key to becoming a successful investor.
Lynch advises ignoring short-term market noise and sticking to solid companies with strong earnings, even during declines. Many claim to be long-term investors, but true commitment is tested during market downturns, highlighting the importance of resilience and consistency.
Here’s an excerpt from the book:
Twenty years or longer is the right time frame. That’s long enough for stocks to rebound from the nastiest corrections on record, and it’s long enough for the profits to pile up.
Eleven percent a year in total return is what stocks have produced in the past. Nobody can predict the future, but after twenty years at 11 percent, an investment of $10,000 is magically transformed into $80,623.
To get that 11 percent, you have to pledge your loyalty to stocks for better or for worse—this is a marriage we’re talking about, a marriage between your money and your investments.
You can be a genius at analyzing which companies to buy, but unless you have the patience and the courage to hold on to the shares, you’re an odds-on favorite to become a mediocre investor.
It’s not always brainpower that separates good investors from bad; often, it’s discipline.
Stick with your stocks no matter what, ignore all the “smart advice” that tells you to do otherwise, and “act like a dumb mule.”
That was the advice given fifty years ago by a former stockbroker, Fred Schwed, in his classic book Where Are the Customers’ Yachts? and it still applies today.
People are always looking around for the secret formula for winning on Wall Street, when all along, it’s staring them in the face: Buy shares in solid companies with earning power and don’t let go of them without a good reason.
The stock price going down is not a good reason.
It’s easy enough to stand in front of a mirror and swear that you’re a long-term investor who will have no trouble staying true to your stocks.
Ask any group of people how many are long-term investors, and you’ll see a unanimous show of hands. These days, it’s hard to find anybody who doesn’t claim to be a long-term investor, but the real test comes when stocks take a dive.
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