WE CAN TALK about valuations, earnings and cash flow until we’re blue in the face. We can listen to the bears, the bulls, economists and the Federal Reserve ad nauseum. We can watch the technical charts, fundamentals and everything in between.
But in the final analysis, all that matters is the bottom line. Everything else is just conversation.
Folks, I hate to break it to you, but we’re all going to die eventually. The trick is to have lots and lots of money right up until the very last moment. No, money won’t buy happiness — but it can make you more comfortable. Whether it’s a top-notch suite at Memorial Sloan-Kettering Cancer Center or an endless supply of premium prunes, money buys peace of mind. It’s one of the few things I don’t want to be without in old age.
When you invest, you invest time as well as money. More than earnings, hot mutual funds or a promising IPO, time is the biggest factor in producing wealth. Not necessarily time in the stock market, mind you, but time over which money can compound if managed with a goal toward absolute return. We’ve been talking about the importance of absolute return since early 2001, when we first pointed out how real money is made as a result of compound interest more than security selection. The idea is simple: Even low levels of positive return will eventually create wealth as a result of consistent compounding over time. (more…)