Everybody knows what a “stock” is, but how many know how that term was derived. Obviously, today a share of stock is a piece of paper denoting ownership in a corporate enterprise entitling the owner to the benefits derived therefrom.
However, the term goes back to the 800’s and is rooted in the old Teutonic word “stukko” which meant a tree or piece of wood. The actual word “stock” goes back to the 13th century where a piece of wood was used to record transactions. So what does this history have to do with investing?
Given the history above, investors would be better served if they thought of stocks as trees from which the word is derived. Trees grow slowly and some years there is more rapid growth than others. Watching a tree grow would be a long, boring enterprise if one just stood in front of one continually watching. However, if one leaves and comes back months or years later the growth can become apparent. Properly designed investment portfolios are the same.
If you were to look at the rings of a tree, you could see that the growth averaged out. Over time there are rings that indicate rapid years of growth and others less so. Increased growth years are followed by low to negligible ones and vice versa.
So it is with stocks and markets. So it was with Joseph’s predication of seven fat years followed by seven lean. Life, markets and investing is cyclical in nature. This is why the secret sauce of investing is encompassed with two words: patience and discipline. We are in “lean” times right now. Keep the foregoing in mind and if you are appropriately diversified, patient and disciplined the growth period will again emerge. When? Who knows, but this historically has always been the way of the investing world!