It’s October 2008, and the economy is collapsing during the worst financial crisis since the Great Depression.

Job losses are mounting, and terror grips the financial markets. Stocks fell 9% last month, and no one knows when the next Lehman Brothers might hit the market like a bombshell.

Stocks just hit -40% from their record highs in October 2007. Into this chaos steps Warren Buffett, the greatest investor in history.

The “oracle of Omaha” has delivered 20% annual returns for 45 years, multiplying investor money almost 3,600-fold.

On October 16, Buffett publishes “Buy American, I Am” in The New York Times. He pounds the table and tells Americans he’s buying billions worth of blue-chip bargains.

Surely, the greatest investor of all time knows what he’s doing…

But in a matter of months, stocks fall another 30%.

So what did Buffett do after being so disastrously wrong? He kept buying as the S&P 500 tumbled all the way to a 58% decline, the second biggest in US market history.

And investors who followed Buffett’s advice at the time… made 6X their money by the end of 2022, even counting last year’s bear market.

One of the most important – and lucrative – lessons of Wall Street is: Time in the market matters, not timing the market.

Let me show you why this has never been truer than in as we start 2023. More importantly, I’ll show you why it’s so important for you to be buying world-class blue-chips right now.

Because if you wait for “the dust to settle,” you’ll almost certainly regret it. In fact, not buying blue-chip stocks in 2023 be disastrous for your retirement portfolio.

Timing the Market Is Tempting

No matter how far stocks fall, they can potentially always fall further. This is why it’s so tempting to wait a little longer to buy world-beater blue-chips just a bit cheaper.

Let me give you a perfect example. In December 2008, Altria (MO), the best-performing dividend growth stock in history, yielded 15%. The dividend was safe, protected by stable sales and cash flow, and a strong balance sheet.

Anyone who bought Altria in December 2008 locked in a safe 15% return from dividends alone, even if they never grew again.

But Altria was a dividend aristocrat with a 38-year dividend growth streak at the time. So buying it in December 2008 gave you a 20% annual long-term return (exactly what Buffett has delivered for 55 years).

But it seemed so “obvious” that stocks had to keep falling. And they did. The S&P didn’t bottom until March 9, 2009. But by that time, Altria was already up 9% again.

Here’s another example… Amazon (AMZN) was one of the worst disasters of the tech crash of the late 1990s. From its March 2000 highs, it fell a gut-wrenching 93%.

Meaning Amazon got cut in half… four times.

The market bottomed in October 2002. But Amazon had already hit its bottom… back in January. When the market finally stopped falling, Amazon was up almost 70%.

Waiting for the market to stop falling before buying back in would have meant missing out on most of that incredible comeback.

The point is that it’s always a market of stocks, not a stock market. And individual blue-chip stocks can bottom much earlier than the market in general.

But even knowing that, it’s still not worth it to try and time the market. Here’s the shocking reason why.

Why Market Timing Is Dangerous and Unnecessary

Imagine two investors. One buys the S&P every January 2. The other is the best market timer in history.

This second hypothetical investor only buys on the lowest day of the year, every year, for 40 years.

After all that work or luck or whatever it would have taken, you’d think the market timer would come off much richer than the first investor… But you’d be wrong.

In fact, from the 40-year period of 1970 to 2019, the perfect market timer would have ended up 22% richer. Not 22% per year, but 22% over 40 years – a 0.5% better annual return.

How is that possible? Because buying 10% lower gets you 11% higher returns over an investing lifetime. And a 20% lower price gets you 25% higher returns.

At Wide Moat Research, we don’t wait for bottoms when adding the best dividend stocks to our portfolios. That’s why over decades, blue-chip stocks like we recommend historically earn investors 13% annual returns.

That gives us:

  • A 5,000% return over 30 years.
  • 51X your money.

Imagine not earning 5,000% returns because you were trying to earn an additional 25% higher return.

In other words, if you try to time the market, it’s equivalent to risking walking away from $200 because you’re trying to make $201. That extra $1 isn’t going to make your retirement any richer. But passing up on that 50X return might mean never retiring at all.

Safe Investing,

Adam Galas
Analyst, Intelligent Income Daily

Source: Wide Moat Research