Do market downturns and volatility worry you? It’s a simple ask, but the answer to this question might reveal a lot about your investing style and whether you can make money or not. Several legendary investors have advised individuals to play the long game, however, only a few pay heed.
Whether it is Warren Buffett, Peter Lynch, or Charlie Munger, you would hardly find any well-known investing doyen not speaking for long-term investing. Even Shelby Cullom Davis – well-known American investor, businessman, and philanthropist – shared similar views on how you can most of your money.
Shelby Davis advised investors to look at the long term to make the most of their investment. He was of the view that successful investing entails long-term commitment and emotional discipline, rather than people reacting to any short-term reactions or volatility.
Wealth wisdom quote of the day by Shelby Cullom Davis: ‘You make most of your money in…’
American investor Shelby Cullom Davis is credited with starting Shelby Cullom Davis & Company in 1947, which became a leading investment firm. He had famously said, “You make most of your money in a bear market, you just don’t realize it at the time.”
Not only did Shelby advised people to bet for the long run, but his firm also lived by the idea, thereby giving rise to the term – “Davis Dozen”. The legendary investor for a core portfolio of about a dozen big long-term winning stocks which he continued to hold for decades.
ALSO READ | Wealth wisdom of the day: ‘Rule No. 1: Never lose money. Rule No. 2…’ – Warren Buffett’s advice for investors
Do you really make money in a bear market?
What the quote intends to imply is that bear markets give investors the chance to purchase value stocks at sharp discounts, an opportunity they would hardly see during a bull run. Wealth building takes time and so one needs to stay in the long game.
A recent ET Wealth–Crisil SIP study corroborated the same. It showed that investors who are in for long run have almost zero chance of losing money. However, the probability of making a loss goes down as your investment tenure goes up. The study shows that if you do a 1-year SIP, the probability of a negative return is 22.7%, meaning you could lose 22.7% of the time.
This probability, however, decreases with tenure. After 6 years, the chances that you make a loss in SIP come down to below 2%. And if you stay invested for 10 years, the chances of a loss are zero!
ALSO READ | Do SIPs really work? ET Wealth-Crisil SIP Study shows long-term SIP investors have almost zero chance of losing money; here’s why
Who was Shelby Cullom Davis?
Leading financial advisor to governors and presidents and much celebrated investor Shelby Cullom Davis is known for laying the foundation of Davis Funds. He had parlayed an initial investment of $100,000 in the late 1940s into more than $800 million by the end of his career in the early 1990s.
He has often spoken about long-term investing and is also credited with another widely known saying – “Invest for the long haul. Don’t get too greedy and don’t get too scared.”
Short-term forecasting, he said, is like “flipping a coin”, noting that stocks are predictable over 10-20 years.
