Tune out the 'blockers', and take long-term view.
A lot of the job of a management consultant is about implementing change. And early on in my consulting career, I learned to watch out for the 'blockers'.
Blockers, in short, are people who resist change by pointing out all the reasons why something might not work, and isn't a good idea -- rather than thinking about the reasons why something should work, and is a good idea.
And with the FTSE 100 index now down just over a thousand points since mid-April, the blockers are certainly out in force. I expect to meet at least one in my local this evening, shaking his head and pointing out the folly of investing in anything other than nice, safe deposit bank accounts.
Danger: blockers ahead
There are plenty of blockers in the media, too, and out there in blogland.
As Bruce Jackson points out, recent economic news has at least one pundit talking about a third depression, brought about through the wave of fiscal belt-tightening presently sweeping across western economies. And in this case, the pundit is none other than Paul Krugman, a widely-respected economist.
Certainly, there's no shortage of news to worry about if you want to go looking for it. But the trouble is, it can rapidly lead to 'analysis paralysis', and a conviction that now isn't the time to invest. The result? Missed opportunities, and on a significant scale.
Blockers, in short, can block you from getting rich, and retiring early. And you do sincerely want to be rich, don't you?
For a moment, let's turn the situation on its head. We're back in mid-April, and the FTSE is at 5,825.
Now, the blockers are telling us that nice safe-looking shares with a reasonable yield are starting to look fully-priced.
Take Tesco (LSE: TSCO), for instance, at 450 pence. It's easy to remind ourselves that back in the late summer of 2009 the share price was just 370 pence, and kick ourselves for missing the boat. If only we'd bought back then, we tell ourselves, wishing that the share price would somehow magically fall again to such bargain basement levels.
Well, we've got our wish. Yesterday, Tesco actually dipped below 370 pence, to an intra-day low of 368 pence.
Did you buy?
Nuggets of wisdom
At times like these, I'm reminded of several nuggets of wisdom from investment guru Peter Lynch, who as manager of Fidelity's flagship Magellan fund outperformed the market year after year.
Here they are:
- If you spend 14 minutes a year worrying about the market, you've wasted 12 minutes.
- You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets.
- The key to making money in stocks is not to get scared out of them.
- When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom.
There's a message, there. And something of an investing thesis, too.
Tune out the noise. Look at the fundamentals. If it's cheap, buy.
Sure, it might get cheaper still -- but in the meantime it's paying you a dividend, and you're repeating the pattern by buying something else, as well.
And it's a logic that works for any number of big, dependable businesses with strong brands, a global franchise and Warren Buffett-style competitive moats. Tesco, for instance. Or GlaxoSmithKline (LSE: GSK). Or Unilever (LSE: ULVR).
Or, if individual companies aren't your style, how about a FTSE All-Share index tracker? Or a FTSE All-Share ETF?
Or even an investment trust? Scottish Mortgage (LSE: SMT) has been riding out uncertain economic conditions since 1909. Others go back even further: Foreign & Colonial Investment Trust (LSE: FRCL) has been steadily accumulating wealth since 1868.
And so can you, if you tune out the blockers and take long-term view. If, that is, you sincerely do want to be rich.
More from Malcolm Wheatley:
> Malcolm holds shares in Tesco, GlaxoSmithKline, and Scottish Mortgage.
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