Let’s say you believe that team A is an excellent team. If you are betting that your team will win in a game then you have to be right on that day, which is not certain as even the best teams can have an off day. But, if you are betting on good win record over an entire series your odds of being right improve. If you are betting that your team will have a good win record in a season or over a few seasons, your odds improve even more.
The same concept works in stock markets, if one is investing in a well-run business, it will do well over time. Yes, there will be periods of poor or indifferent performance, just like the team having an off day, but in the long run it will pay off.
In times of boom it is common to hear “Invest now” or “this is a once in a lifetime opportunity”. When we hear this we should remind ourselves that we are living in a constant stream of opportunities. Yes, these opportunities are all unique so each one can be called “once in a lifetime”, but they are not that different and they are always present. Reality is that, in this steam of opportunities, we have missed most of them and will continue to do so. The key is to realize that as long as we prudently capture a few of these opportunities we will do ok.
Please be sceptical when someone talks about a window of opportunity that is open for a limited amount of time. Investing is all about taking risks, but there is no point in making time an adversary when it can be a good friend.
For instance when someone is using derivatives (futures and options) as “investments” they have to realize that they not only have to get their call right, they also have to be right in the given time frame. Each one of these individually are tough asks and taking both on at the same time is usually not a prudent thing. Warren Buffett called derivatives “financial instruments of mass destruction”.
One should be investing in products which have greater chance to do well over time, like fine wine maturing over time. When one is investing one should select a fundamentally good businesses with good management and give them time to deliver results. If one starts investing early in their life, they have the time on their side and the magic of compounding will help build their wealth.
This is not a call for inaction, but a caution about the charlatans peddling “once in a lifetime opportunity”. And this is also a call for well thought out approach that agrees with your common sense and sensibilities.
Time should be your best friend and not an adversary.