Contributor Since 2008
Association with SA author Jose Trias
Just imagine if you could have bought shares of Nike at $80, back in August, and then sold out $100 last month. Wouldn't that be fun? A quick 25% return - what could be better?
Answer: how about this. Same stock, longer time frame.
That's a 73,221% return you are looking at, in case you were wondering.
Everything you need to know about investing comes down to one simple thought experiment.
First, ask yourself, "what would I need to do get a 25% return, on the one hand, verses what would I need to do to get a 73,221% return, on the other hand?" Second, go do what's needed to get whichever of those two returns you think is better, and do not do anything else besides that.
In my case, I tend to think that 73,221% is more than 25%, so my approach is to do what's needed to get that return: buy the stock and then sit on my hands for 40 years. If I got hit on the head and somehow became convinced that I am really a banana and that 25% is more than 73,221%, then I'd go out and do what's needed to get that 25% return - build a time machine, pick August as my investment date and December as my selling date.
That's investing. Doing what you need to do to get what you want and not doing anything else besides that.