Small-Cap Investing

The temptation to time the market is strong-but the cost of missing key days can be staggering. In Replacing the Outdoors With Oil in the Model Shadow Stock Portfolio, John Bajkowski explores the risks of trying to dodge market downturns and the rewards of sticking to a disciplined, long-term strategy. He shares how the AAII Model Shadow Stock Portfolio, despite its volatility, has consistently outperformed large-cap benchmarks over the past three decades by following strict rules for stock selection, valuation, and earnings.

One key insight? Missing just the best-performing month each year can cut your returns dramatically-more than the benefit of skipping the worst ones.

Question for You: Have you ever tried to time the market-jumping out during declines or waiting for the "right time" to invest? How did that decision affect your returns or investing mindset?

If you're interested in the power of staying invested and learning how disciplined portfolio management works in practice, check out the full article: Replacing the Outdoors With Oil in the Model Shadow Stock Portfolio.

Looking forward to hearing your thoughts and strategies!

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Joel Reyes
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I have friends who are always talking about what they "think" the market is going to do in the next month or so and what they should buy or sell in response to their sage predictions. I just have to shake my head. Like Clint Eastwood said, "A man has to know his limitations," and I know that I have no ability to read the collective minds of millions of other investors a month in advance. I have no crystal ball that can be relied upon. Thus, my only option is to stay the course with the knowledge that unless our civilization collapses, or unless traditional notions of freedom are destroyed in our country, my equities will advance nicely in the long run.

I'm living proof that buying good equities and holding them through thick and thin actually works. It also helps to start doing that early in life.

Although the stock market is not susceptible to prediction in the short run, in the long run, it is almost certain to go up. It is also predictable that good, profitable companies will outperform the general market in the long run. The only thing lacking in long-term predictions is precision. I have no idea how much the stock market will be up 10 years from now, but probability based on history says it will be up significantly from where it is today. That's not certain; it is merely highly probable, but I'll invest my money based on probability, as opposed to hunches, any day.

I stayed the course through the '87 crash, the bursting dot-com bubble, and the '07-'09 meltdown, holding 100% equities all the way. It has paid off enormously, and I was able to retire in my early 50s. In the 13-or-so years since I retired, the value of my 100%-equities portfolio has continued to grow, and I expect it to continue doing that until I kick the bucket. Nevertheless, I fully expect to have the value of my assets cut in half at least once before I exit life. If that happens, I will weather it the way I've always weathered downturns. If my expectation is not met, I won't be disappointed.