News

Becoming the Top 1% of Mutual Fund Investors

Jul 21, 2014

In covering the markets from a trader’s standpoint, and then as a long-term investor and financial web entrepreneur, I can tell you that to get a true sense of investing success, long-term is really the only game a mutual fund investor needs to think about.

What that entails is not a glamorous road, but one that, if remained on, will bring financial prosperity others who decide to avoid investing in the stock market will never achieve. It will require a financial capital investing endurance through the best and worst of market cycles.

Staying the Course

The day-after-day mental grind that often defeats most traders is something long-term mutual fund investors never have to confront. In fact, if one can withstand the ability to buy in the face of the worst financial crisis or whatever events take markets down precipitously, you will almost be guaranteed to end up with the most envious of stock market investors.

To have the discipline to look at sell-offs as better entry points is the correct approach and one that will pay big dividends over the course of an investing lifetime. In 2008, as the financial crisis was gripping Wall Street, equity prices in some of the best-known brands were down 20%, 30%, and some even 40% off their all-time highs. Stocks were on sale! Fast forward several years later and those investors who understood that the move lower tends to not last long, went about their business and just kept putting money to work.

Putting It in Perspective

The best example I can give is none other than the Vanguard Total Stock Market Mutual Fund (VTSMX), which hit a low of $16.60 on Mar.6, 2009, and today is trading at $49.70. That’s nearly a triple off the bottom! There are many more examples of funds that have done even better. Unfortunately I know of plenty of investors that panicked and could not avoid watching the financial media’s blow-by-blow accounts, making a reason to sell that much easier.

The Bottom Line

To remain and ultimately be in the top 1% of mutual fund investors, you must accept the challenge of the stock market’s cycles and mood swings. The financial rewards will be well worth it!