More on this book
Community
Kindle Notes & Highlights
Read between
March 7 - March 9, 2019
you can’t win this game unless you have the emotional fortitude to get in it and stay in it for the long term.
www.Unshakeable.com
Podcast and app
The key to making money in equities is not to get scared out of them. —PETER LYNCH,
we’re not rewarded when we do the right thing at the wrong time. If you plant in winter, you’ll get nothing but pain, no matter how hard you work.
To survive and thrive, you and I have to do the right thing at the right time.
Our capacity for pattern recognition is also the number one skill that can empower us to ac...
This highlight has been truncated due to consecutive passage length restrictions.
Once you recognize the patterns in the financial markets, you can adapt to them, utilize ...
This highlight has been truncated due to consecutive passage length restrictions.
compounding is a force that can catapult you to a life of total financial freedom.
Over time this force can turn a modest sum of money into a massive fortune.
You’re never going to earn your way to financial freedom. The real route to riches is to set aside a portion of your money and invest it, so that it compounds over many years.
That’s how you become wealthy while you sleep. That’s how you make money your slave instead of being a slave to money.
the number you should really aim for is 20 times your income.
Nest egg
how are you going to get there? First, you’ve got to save and invest—become an owner, not just a consumer. Pay yourself first by taking a percentage of your income and having it deducted automatically from your paycheck or bank account.
This will build your Freedom Fund: the source of lifetime income that will allow you to never have to work again.
increase what you save from 10% of your income to 15%, or from 15% to 20%.
No matter what your situation, you have to take the first step and get underway.
The single best place to compound money over many years is in the stock market.
Why? Because this is incredibly fertile land! Like our ancestors, we need to plant our seeds where we can reap the greatest harvest.
Some winters arrive sooner, some later; some are severe, some mild. But when you stick with an effective approach over many years, your probability of success increases massively.
What separates the money masters from the crowd is this ability to find a winning strategy and stick with it, so the odds are always strongly in their favor.
Once you understand the seven indisputable facts we’re about to explain, you’ll know how the financial seasons work. You’ll know the rules of the game—the principles on which it’s based. This will give you an enormous edge, since even many...
This highlight has been truncated due to consecutive passage length restrictions.
But before we get started, let me quickly explain some investment jargon. When any market falls by at least 10% from its peak, it’s called a correction—a peculiarly bland and neutral term for an experience that most people relish about as much as dental surgery!
When a market falls by at least 20% from its peak, it’s called a bear market.
the biggest danger isn’t a correction or a bear market, it’s being out of the market.
Freedom Fact 1: On Average, Corrections Have Occurred About Once a Year Since 1900
Historically, the average correction has lasted only 54 days—less than two months! In other words, most corrections are over almost before you know it. Not that scary, right?
in the average correction over the last 100 years, the market has fallen only 13.5%. From 1980 through the end of 2015, the average drop was 14.2%.
But here’s what you have to remember: if you hold tight, it’s highly likely that the storm will soon pass.
Freedom Fact 2: Less Than 20% of All Corrections Turn Into a Bear Market
Freedom Fact 3: Nobody Can Predict Consistently Whether the Market Will Rise or Fall
even a man with a broken watch can tell you the correct time twice a day.
Some of these folks may actually believe in their own powers of prediction; others are just slick salesmen. So take your pick: Are they idiots or liars?
But I’ll tell you this: if you’re ever tempted to take them seriously, just remind yourself of this classic remark from the physicist Niels Bohr: “Prediction is very difficult, especially about the future.”
Warren Buffett has said, “The only value of stock forecasters is to make fortune-tellers look good.”
Freedom Fact 4: The Stock Market Rises over Time Despite Many Short-Term Setbacks
Despite a 14.2% average drop within each year, the US market ended up with a positive return in 27 of the last 36 years.
Some companies will die, and some stocks will fall to zero. But one big advantage of owning an index fund that tracks a basket of stocks such as the S&P 500 is that the weaker companies intermittently get culled and replaced by stronger ones. It’s survival of the fittest in action!
Freedom Fact 5: Historically, Bear Markets Have Happened Every Three to Five Years
“History doesn’t repeat itself, but it rhymes.”
How bad does it get when the market really crashes? Well, historically, the S&P 500 has dropped by an average of 33% during bear markets. In more than a third of bear markets, the index plunged by more than 40%.
Even if you have the knowledge and fortitude not to sell, you’ll likely find that bear markets are a gut-wrenching experience.
“How do I feel when the market goes down 50%?” he asks rhetorically. “Honestly, I feel miserable. I get knots in my stomach. So what do I do? I get out a couple of my books on ‘staying the course’ and reread them!”
But here’s what you need to know: bear markets don’t last.
They varied widely in duration, from a month and a half (45 days) to nearly 2 years (694 days). On average, they lasted about a year.
remember: winter never lasts! Spring always follows.
Freedom Fact 6: Bear Markets Become Bull Markets, and Pessimism Becomes Optimism
when the mood in the market is overwhelmingly bleak, superinvestors such as Buffett tend to view it as a positive sign that better times lie ahead.
these periods of consumer pessimism are often the ideal time to invest.
the stock market isn’t looking at today. The market always looks to tomorrow. What matters most isn’t where the economy is right now but where it’s headed. And when everything seems terrible, the pendulum eventually swings in the other direction.
The stock market is a device for transferring money from the impatient to the patient. —WARREN BUFFETT
