Wait It Out, Ride The Wave

I don’t get tired of emphasizing that in the investment world, long-term is everything. Be careful with promises of quick and easy money.

Still, some of you are skeptical while you nod in agreement with the former statement; Understandably, you have reservations.

Let’s use a real example. We are going to go back in time and look at McDonald’s Co:

  • You had $10,000 in your bank account January 1, 1990, and you decided to put all of your money in McDonald’s stock, trading under the symbol MCD at approximately $34.37. This would have given you around 290 shares.
  • By the end of 1991, the stock traded at $29.125, reducing your investment to $8,472. You just lost over 15% in your first year.
  • The stock does a series of 2:1 splits (meaning, for every share you owned, you received an additional one) during 1994 and 1999. At the end of 1999, you have 1163 shares of MCD trading at $45.25. Your investment would have grown so far to $52,654.71 excluding dividends.
  • What if I tell you this was the peak of MCD before taking a turn for the worst? I would say that you, as an investor, if not prepared, would have needed a strong belief system in order to withstand the upcoming downturn. By 2003, McDonald’s was trading for $16.17. You now have only $18,816.
  • If you would have sold between 2000-2003, you would have missed out greatly on what McDonald’s had in store for their investors. MCD’s stock price did nothing but go up, and as of September 1, 2016, it traded at $115.51. You could have had in your account over $168,000 and over $32,000 in dividends throughout your investments.

Think about it; had you waited and sold this long-term investment today after owning it for over 25 years, your taxes on the dividends and stock would have been minimal, and your gains would have been plenty!

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