Stay Invested

One of the most important keys to a successful investment strategy is to always be invested. It is important to have your money invested where it can grow and compound rather than sitting on the sidelines in cash. The main reason why investors go to cash is as a defensive move. They believe that the market will crash, and their hope is that once everything has fallen in price they can swoop in and purchase everything at lower prices with the cash they had ready to deploy. This is usually because they heard some market gurus or forecasters have projections that stocks will go down in the next couple months.

Trying to predict what the market will do is an impossible task. There are plenty of economists or other experts that proclaim they had successfully called the last crash but will fail to mention that they had predicted it every year for the last 10 years, so eventually they were going to be correct. Even the chairman of the Fed has stated on countless occasions that even they do not know where interest rates will be in the future. There is a funny saying in finance, “Macro economists have predicted 9 of the last 5 recessions.” Even Robert Kiyosaki, who wrote Rich Dad, Poor Dad, is guilty of the constant fear mongering by constantly predicting a real estate crash and then missing the largest real estate boom that happened nearly 2 years after Covid. Point being, no one knows what the market will do tomorrow, or next week, or next month. Not the president, not the chairman of the Fed, not Harvard’s lead economist, not Warren Buffet, and certainly not you and I.

It's important to stay in the market, even at risk of being in the market during a crash, because you do not want to miss out on positive gains in the market. On average, the market will crash every 7 or so years. Hard part is that is on average. Next time could be in a year, or 10. No one knows. If you stay invested in the market and make an average of let’s say 8% a year and stay invested even during the crashes, your gains will offset the losses by a wide margin. And by staying invested, you will also be able to gain when the market turns. An interesting fact, if you missed the market's 10 best days over the past 30 years, your returns would have been cut in half. And missing the best 30 days would have reduced your returns by an astonishing 83%. To reiterate, you will not know when those best days are, but they tend to be right before and after a crash. So, by staying invested, you can capture those best “gain days”.

“But if going to cash is to protect you from a market crash and Iron Bay Research advises against this, how will your investments be protected? How will your portfolio be able to ride out a crash THAT IS GUARENTEED TO HAPPEN?” This is where owning great businesses comes into play. A portfolio is made up of several different investments, and every single one of those investments must be a strong company that can not only give great overall returns to the investor but protect that investor in tough markets. 

A company can withstand a market crash by having strong financials such as manageable debt and cash flow coming into the business through their operations. Iron Bay Research obsesses over a company’s durability to ensure that not only will they survive during market crashes but thrive as they take market share from their competitors.