I was at a party recently and was introduced to an orthopedist. After a few minutes of chitchat, I mentioned the pain in my lower back and asked whether he’d take a look and tell me what to do.
Later that evening, I ran into a lawyer that I know and told him about the dispute I’m having with my neighbor. I asked him whether I should sue and on what grounds.
Toward the end of the night, I was introduced to a mechanic. I described the “chug chug bang” sound my car has been making and asked him to come outside and take a look.
I’m joking. I didn’t do any of those things. I’m not that guy.
In fact, I’m friendly with one of my doctors, and when I see him outside of his office, I never even ask him how work is going so as to not come off as if I want to talk to him about my health.
Yet probably once a week, I’ll be asked at a party, in a text from a friend or in a tweet (you can follow me on Twitter at @stocksnboxing) what stock someone should buy.
If I feel like being a wisenheimer (as my eighth-grade math teacher used to say), I’ll just tell them to put all of their money into GameStop (NYSE: GME) or AMC Entertainment Holdings (NYSE: AMC), making sure they know I’m kidding, of course, usually after a minute or two of silence.
I understand why they’re asking. Because of what I do, people think I have Winning Lottery tickets rattling around my brain that they could cash in if I’d only share them.
And I do have some great stocks – stocks that have the potential to soar in short periods of time – in my noggin that I share with my readers.
But these types of investments are for investors who can afford to speculate. They understand risk, and if the stock doesn’t work out, it’s not going to affect their lifestyle.
Folks who plead with me for one or two names that are going to make them rich quick often don’t have the ability to handle the risk that comes with speculation.
Fortunately for those people, I do, in fact, have a winning lottery ticket – though they’ll have to be patient to cash it in.
There are few guarantees when it comes to investing, but investing for the long term in quality companies is pretty close to a sure thing.
Since 1928, over rolling 10-year periods (e.g., 1928 to 1937, 1929 to 1938, 2011 to 2020, etc.), there have been only seven instances when the market was not higher. Those were the periods ending in 1937, 1938, 1939, 1940, 1946, 2008 and 2009. In other words, you had a 93% chance of success.
The periods when stocks did not make money over 10 years were when the 10-year periods ended during the Great Depression or Great Recession, with one exception: 1946. Though, in that case, you were starting during the Depression and rode the market to the bottom before it started coming back.
And not all periods tied to those economic calamites resulted in losses. If you’d invested in 1932 during the Depression and rode it out until 1941, you’d have finished with gains. Even if you had bought near the top of the dot-com boom in 2001 and sold in 2010 after the financial crisis, you would’ve made money.
In fact, going back to 1928, the total average 10-year return is 129%.
Keep in mind, that’s the return on a one-time investment. If you continue to invest over the course of 10 years, you’ll do even better.
You can improve those results even more if you buy Perpetual Dividend Raisers – companies that raise their dividends every year.
The S&P 500 Dividend Aristocrats Index is an index of companies in the S&P 500 that have raised their dividends for 25 years in a row or more. It is a good proxy for Perpetual Dividend Raisers.
The index was created in 1990. Since then, over rolling 10-year periods beginning with the 10 years ending in 1999, the index has never lost money.
The worst 10-year performance including dividends was a 40% return, ending during the heart of the financial collapse in 2008. Even without dividends – just pure price movement – the index still gained 9%.
That’s not exactly a windfall, I know, but it shows you the power of these stocks. If you had bought them in 1999 at the top of the dot-com bubble and sold just before the bottom of the mortgage meltdown, these Perpetual Dividend Raisers would still have been up!
Since the index began, the average 10-year return with dividends is 196%, nearly tripling your money. The total return is 3,272%.
The best thing about these winning lottery tickets is that they have an extremely high likelihood of paying off if you’re patient.
So when the inevitable question of what stock someone should buy comes my way at a party, my standard answer is, “Buy a Perpetual Dividend Raiser. You’ll thank me in 10 years.”
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