This does not constitute investment advice. I am not a financial advisor. Consult with a financial advisor before investing in anything.
It occurred to me as I was trying to salvage something edible from yet another bruised and blackening piece of fruit, that investing in the stock market is a lot like buying avocados. Your rational mind knows that the best thing to do is to buy light green, unripe ones when they are hard and won’t be battered in the shopping bag on the way home then gently placing them in a bowl next to your bananas to slowly ripen until they are dark green and perfectly soft, all the while resisting the temptation to check on them by squeezing.
All too often however we try to game the system thinking we are smart enough to pick one that is already ripe and get it home safely so that we can have it right away. The folks at the grocery store know this and tempt you by placing the ripest avocados on top of the heap with little stickers that say “Ready to eat now.”
Perhaps, like me, you have thrown away not a few bruised and rotten avocados.
Investing in the stock market is similar. We know that the best thing to do is to buy a (boring) passively managed fund that is tied to the S&P 500 or some other broad market index and let it ripen for say, 40 years, but it is tempting to buy an individual stock that looks like a sure winner or get into an actively managed fund that promises to beat the index. I’ve bought a lot of rotten fruit this way as well. (Oddly enough, the only individual stock I ever bought that did better than the index was, in fact, named for a kind of fruit. It still took quite a number of years to ripen.)
Most of the time now, I am wise enough to buy unripe fruit and nurture it to maturity. But every once in a while, I think I have found the perfect specimen that is ready now and defying reason hand over my custom only to be disappointed, again.
Come to think of it, not just investing but most things are like this. As a friend noted to me this week, “Most of my mistakes happened because I was in a hurry.”
Everything ripens in the fullness of time.