Thursday, April 09, 2009

The idle investor

I've recently started reading a book called How to be Idle. The title should be enough to ensure its success as more and more people have unemployment thrust upon them.

However, the main idea behind the book - that doing less is more - is extremely pertinent for anyone now thinking of dipping their toe in the stock market.

Over eight weeks ago I recommended buying stocks and selling bonds. It just so happens the US stock market is at exactly the same level today as it was then.

In between the S&P 500 fell by 20% and then rose by 25% (unfortunate rule of investing: things need to rise by more than they fall to get back to where they started).

If you were caught out by this sudden fall and rapid recovery in the stock market, don't worry, you weren't alone.

In fact you were in very good company indeed.

Most, if not all, of the the greatest living (and still active) investors have remained confident throughout the past 18 months, and especially at the end of last year, that the stock market was past the worst.

While most of us are fed up watching the stock market fall (and the rest just don't want to look at the stock market at all) there is something very interesting happening at the moment: a turning point.

Turning points are the hardest things to predict and almost impossible to identify in real time. This is why the current situation is so favourable to the investor who is willing to wait. In other words, be an idle investor.

By doing less, you will earn more.

Find a market you like and leave your money there for a year.

You will be amazed at how productive doing nothing can become.