3 Rules Successful Long Term Investors Should Follow

Brett Arends over at MarketWatch gives equity investors’ fretting over the latest market volatility some timeless advice in his latest ROI column — “Buy early. Buy often. And buy cheap.” Arends outlines three principles investors can follow in times like these.

Buy Early: Over most long term periods of time (5-10 years), stocks have a high probability of increasing in value, which is why Arends says investors should have a bias toward being invested and not waiting for the markets to bottom or trying to time the lows. Often times, investors wait too long and forego important gains that happen once a correction or bear market ends.

Buy Often: “Buying often means not going all-in at once but taking it in stages — ideally in equal amounts every month,” writes Arends. The data shows that even if you started investing at set intervals (monthly) at the very worst times (the 1929 crash, the peak in March 2000), investors would, after a few years, have seen profits. When you dollar cost average into the market over time, you put money to work in stocks when they are trading at a discount and benefit from the eventual rebound.

Buy Cheap: Investors should try to look to find the areas of the market that exhibit the most value, according to Arends. These areas of the market are often times the ones that “have fallen furthest and seem the scariest” (European and Emerging market stocks are down anywhere from 20-40% in the most recent decline). This is where “bargain hunters will look first,” says Arends.