Furthermore,
Money happiness | how become:
Have you ever looked at the price of an action on the stock market. For example, and dreamed of having bought it several years ago?
Posted yesterday at 8:00 a.m.
It allows you to dream of all kinds of fantastic scenarios.
For example, becoming a millionaire in three months is possible?
Of course ! Furthermore, It was enough to buy for $ 300,000 in electric lion shares on October 9, 2020, and to sell them on January 15, 2021. However, Boom. In addition, Millionaire.
It’s not realistic, you will tell me. money happiness | how become Moreover, And you will be right. In addition, This stock market movement was not predictable. Similarly, He was only obvious after the facts.
This is the example that came to my mind this week by reading an. For example, article from Montreal Journal Entitled “Become a millionaire thanks to Dollarama! Therefore, ».
We were told that it was enough to invest $ 17,000 in 2009 in dollarama shares to be a millionaire today, 16 years later.
“No need to scratch a lottery ticket. Furthermore, No need to bet on an obscure crypto or start-up from Silicon Valley. Meanwhile, It was simply necessary to believe in a very ordinary Quebec company, which sells baby, sandwich bags and candies. Similarly, »»
If it was so simple …
“Apple? money happiness | how become Meanwhile, They will go bankrupt! Meanwhile, »»
Climbing a stock market rocket and taking off towards the stratosphere is undoubtedly the best shared fantasy on the scholarship. Additionally, Meanwhile, Even people who are not interested in investment will tell you: to have success. you have to identify the next Costco, the next Microsoft, the next dollarama, and be patient!
Unfortunately, people who are successful with this approach are rare. And those who underperform are legion-and that includes both amateur investors and professionals.
Take a business that many would like to have: Apple.
In his new book How Not to Investthe American author and investor Barry Ritholtz says he bought Apple shares in 2001.
A gold mine? A circuit stroke? Not really.
“It was one of my best career shots,” he writes. But it was also my worst blow. »»
We forgot it today, but investing in Apple was an unpopular choice in 2001. Apple was a marginal company, which had just experienced huge losses.
“Even my mother, a former real estate agent who was interested in the scholarship, said to me:” Apple? They will go bankrupt! ” », Writes Mr. Ritholtz
Apple’s shares were traded at $ 15 when it bought it. Shortly after, the title went up to $ 20.
Barry Ritholtz could have sold. But he was patient. He finally sold his titles when the action reached $ 45, three times the amount paid at the start.
“” A hat-trick! “, I launched money happiness | how become proudly, in what turned out to be the worst sale that I have ever made. »»
We understand it. With the various fractionations of the action. each dollar invested in Apple shares in the early 2000s is worth around $ 1,000 today.
Afterwards
Research shows us that selecting individual titles, what is called an “active” strategy, is counterproductive in investment. The concentration of our investments increases the risk. It decreases our chances of having good long -term results.
The works of Hendrik Bereseinder, professor at the State University of Arizona, brilliantly illustrated it a few years ago.
In his study Do Stocks Outperform Treasury Bills ?, Published in 2018, Mr. Beresinder has evaluated the yields of American actions since 1926.
He realized money happiness | how become that 4 % of the shares were responsible for the entire wealth creation since that date. while the remaining 96 % have collectively had yields equal to those of treasury bills.
“Our results make it possible to explain why active strategies. which tend to be little diversified, are most often less efficient,” writes Mr. Berere.
In short. the danger when you buy companies in the room is not to have these 4 % of future “superstars” companies in our portfolio. And, remember, the superstars are only obvious with hindsight.
In 2009, if we had $ 17,000 to invest, we could have chosen to buy Bombardier instead of dollarama.
If we exclude a dividend which ceased to be paid in 2014, our $ 17,000 would be worth $ 14,280 today, 16 money happiness | how become years later.
We would have “believed” in a well -Quebec company. But we would be far from being a millionaire.
The winners of tomorrow
Of course, everyone is delighted with the stock market success of dollarama. Well -diverse investors took advantage of it. since the company is part of the S&P/TSX index, which brings together the 250 largest companies listed on the Toronto Stock Exchange – a index that can be purchased in a single transaction thanks to a low -cost indexed fund which reproduces its performance.
And the investor who invested in a fund following the S&P/TSX has taken much. less risk than that which buys individual companies.
Reign in the story of Barry Ritholtz the next time you bite your fingers for not having money happiness | how become bought this. that action for exceptional performance. The chances of being right are tiny. And even when we are right, the chances of keeping a “winning” action for decades are practically zero.
After all, Apple lost more than 53 % of its value in 2008. Dollarama lost 44 % in 2018. Very few investors can cross such landing without selling.
Best investment practices is not to try to identify the next dollarama. It is to buy the entire market, and to sleep quietly, knowing that the next dollarama is already there.
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