Three Things Every Investor Should Know - Carson Group (2024)

“Did you hear the one about the statistician who put his feet in the oven and head in a bucket of water? When asked how he felt he replied, ‘on average, I feel pretty good.’” -Old statistics joke

One of my favorite parts about my job is I get to travel all over the country and talk with our Carson Partners and their clients. I love traveling and seeing the world, but I also love talking with clients and, helping them understand what is really happening out there. There is so much bad info out there, simply designed to get you to click on it. I like to try to show you shouldn’t believe everything you read and there are some things that all investors need to know, but the media doesn’t typically tell us.

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My presentations usually discuss our broad market and economic views, with some sprinkled in talk about the Fed, inflation, geopolitical worries, Washington drama, or whatever else is in the news that is scary for investors. But there are three things that I always discuss and I wanted to share them in today’s blog.

There’s No Such Thing as Average

We know that stocks gain about 9% a year going back in time, but the catch is most years are rarely around 9% when all is said and done. Go read the line about the statistician above one more time for a little context on what I’m about to share.

Going all the way back to 1950, we found there were only four years that stocks gained between 8% and 10% on the year! That is amazing, but it shows that average isn’t so average when it comes to investing. Taking things a step further, since 1950 there were 21 years when stocks were down on the year, but 20 years when they were higher by more than 20%! So the odds are nearly the same for an up 20% year as a down year. I do this for a living and every time I hear this I’m still surprised. Average isn’t so average is the first thing investors need to know.

Volatility Is the Toll We Pay to Invest

There is no such thing as a free lunch and that is even more true when it comes to investing. Over the long run stocks will average about 9%, as we discussed above, but the catch is you’ll have every reason under the sun to want to sell along the way.

Think about just three weeks ago. Stocks hit a correction (down 10%) and the bears were out in full force telling anyone who would listen that a major market calamity was right around the corner. Instead, we saw your typical late October low and subsequent strong November rally. If you’ve been reading what we’ve been saying then you know we did our best to ignore the hype and layout why a strong year-end rally was still likely. Well, stocks are up 7% already in November and we are well on our way to a nice year-end rally.

On the Carson Investment Research team, we like to say that volatility is the toll you pay to invest. You can’t get anywhere good without paying some type of toll and longer-term wealth is created with volatility, that’s the toll.

Even though we had a 10% correction recently, you’d think it was about as rare as my Cincinnati Reds winning a World Series the way everyone acted. But it turned out that most years see a 10% correction, so we shouldn’t have been shocked, especially after the best first seven months for the S&P 500 since 1997. Some type of give back would have been perfectly normal and healthy.

Your average year sees 1.1 10% corrections per year, along with 3.4 5% mild corrections and 7.3 3% dips per year. (Thanks to our friends at Ned Davis Research for these important numbers.) Sure, a 10% correction when it happens isn’t fun, but investors need to know they are quite normal.

They say the stock market is the only place things go on sale and everyone runs out of the store screaming. Well, remember this data next time people start running out of the store and you find yourself some good deals.

All About Time in the Market

The third thing all investors need to know is time is your friend. Around here we like to say it is about ‘time in the market, not timing the market’ that matters. This simply means the longer you are willing to hold stocks, the more likely you will have gains.

The S&P 500 is higher 53% of the time on any random day, but that jumps to higher 71% of the time each year. What about holding 10 years? Higher more than 90% of the time. And if you are willing to go out 20 years, the stock market has never been lower. Sure, if you buy right near a major peak it very well could take years to get back to a profit, but the good news is investors aren’t forced to only buy near peaks. So buying when things are lower will likely exponentially enhance your future returns.

Eisenhower said, “Plans are useless, but planning is everything.” I like that and having that plan in place, leveraging these three bits of investment advice, will greatly help over time. There are so many investing lessons I’ve learned over the years, but if you learn these three and apply them, you likely won’t panic the next time someone on TV tells you how bad things are. Instead, you will stick with your plan.

For our latest views on why the Fed is done hiking, the economy, and year-end rally, be sure to listen to or watch our latest Facts vs Feelings with Sonu and myself.

For more of Ryan’s thoughts click here:


Three Things Every Investor Should Know - Carson Group (2024)


Three Things Every Investor Should Know - Carson Group? ›

An above-average dividend yield (but not too high) Low P/E ratio. A price that is less than the company's book value.

What are the three golden rules for investors? ›

The golden rules of investing
  • Keep some money in an emergency fund with instant access. ...
  • Clear any debts you have, and never invest using a credit card. ...
  • The earlier you get day-to-day money in order, the sooner you can think about investing.

What are the three investment picking criteria? ›

An above-average dividend yield (but not too high) Low P/E ratio. A price that is less than the company's book value.

What are the three criteria an investor should consider before investing? ›

The options for investing your savings are always increasing but they can all still be categorized according to three fundamental characteristics: safety, income, and growth. The first task of any successful individual investor is to find the correct balance among these three worthy goals.

What are the three basic choices for investments? ›

There are three main types of investments:
  • Stocks.
  • Bonds.
  • Cash equivalent.

What is the #1 rule of investing? ›

1 – Never lose money. Let's kick it off with some timeless advice from legendary investor Warren Buffett, who said “Rule No. 1 is never lose money.

What is the number 1 rule investing? ›

Warren Buffett once said, “The first rule of an investment is don't lose [money]. And the second rule of an investment is don't forget the first rule. And that's all the rules there are.”

What are the three key factors investors will be looking at in your financials? ›

What Do Investors Look For In Financial Statements?
  • Revenue. Found on the income statement, the top line (revenue before expense deduction) shows how much money your startup brings in during a set period. ...
  • Profitability. Investors gauge profitability through net income and expense comparisons. ...
  • ‍ Debt Level. ...
  • Cash Flow.

What are the 4 C's of investing? ›

Trade-offs must be weighed and evaluated, and the costs of any investment must be contextualized. To help with this conversation, I like to frame fund expenses in terms of what I call the Four C's of Investment Costs: Capacity, Craftsmanship, Complexity, and Contribution.

What is Warren Buffett's golden rule? ›

"Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1."- Warren Buffet.

What are Warren Buffett's 5 rules of investing? ›

Here's Buffett's take on the five basic rules of investing.
  • Never lose money. ...
  • Never invest in businesses you cannot understand. ...
  • Our favorite holding period is forever. ...
  • Never invest with borrowed money. ...
  • Be fearful when others are greedy.
Jan 11, 2023

What are the 3 main types of accounts and 3 golden rules of accounts? ›

Golden rules of accounting
Type of AccountGolden Rule
Personal AccountDebit the receiver, Credit the giver
Real AccountDebit what comes in, Credit what goes out
Nominal AccountDebit all expenses and losses, Credit all incomes and gains

What are the 4 golden rules investing? ›

They are: (1) Use specialist products; (2) Diversify manager research risk; (3) Diversify investment styles; and, (4) Rebalance to asset mix policy. All boringly straightforward and logical.

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