Stock Investors, Like Alfred, To Lose 98% Of Their Investment

Imagine a casino full of slot machines that all guarantee a constant high return. All you need to do is to put in a bit of money and you will get an incredible income stream for life.

Well, this is exactly what the stock market is, namely a remarkable slot machine with a continuous flow of guaranteed payouts. No skill is required, and relatively little money. And the wonderful thing is that you don’t even need to be lucky since the machine just continues to spew out money without the need for either a strategy or dexterity.


Why should we time the stock market when it works so well for us. Let’s take the example of a stock market investor called Alfred who was born at the end of WWII and is now 74 years old. At his birth, his grandparents gave him $100 of stocks in the Dow Jones index and between the parents and grandparents, $10 was saved monthly to buy stocks for Alfred. All the money went into Dow stocks and dividends were reinvested. By the time Alfred was 24, in 1969, he started working and earned a good salary since he had an excellent education. So he could save $250 per month. Ten years later Alfred had done well in his career and could save $2,000 per month until his retirement at 65 in 2010. His investment account had by that time grown to $6.7 million. He continued to be fully invested in the market from 2010 and saved $1,000 per month of his pension until today. By February 2019, Alfred has amassed a stock portfolio worth $14 million. Alfred had excellent tax advisors so he could avoid capital gains taxes or other taxes on his investments.

The total savings of Alfred’s parents, grandparents and his own amounted to around $1 million over a 74 year period which all went into stocks. Most of it was Alfred’s own savings from his work. The stock market looked after Alfred and his savings very well so that he managed to grow the money invested 14x from $1 million to $14 million. Alfred naturally considered himself to be a very talented stock investor but his luck was that no talent was required nor market timing since Alfred only bought the Dow Jones Index.


So far so good. Alfred has done extremely well in the stock market in spite of some hair raising market falls. During this period Alfred had to suffer some major paper losses like in 1973-4 when the market lost 40% or in 1987 when the market had a similar fall of 40%. But Alfred was never worried since his experience was that stocks always go up. Alfred is a Permabull.

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