Don't Confuse an Acorn for a Stock Market Collapse: Why Volatility Is the Price for Long-Term Gains
By Charles Mizrahi
Founder, Alpha Investor
Banyan Nation,
"U.S. Stocks Turn In Worst Week In 18 Months Over Slowdown"
— Financial Times
"Stocks Have Worst Week Of Year As Recession Fears Reemerge"
— Forbes
"Stocks Plunge, With The S&P 500 Ending Its Worst Week Since March 2023"
— MarketWatch
These were the headlines that greeted investors over the weekend, painting a grim picture of the market.
The financial media sounds like Chicken Little crying, “The sky is falling.”
It turned out to be just an acorn that hit her on the head, but that didn’t stop her from panicking — or the fox from devouring her and all her friends!
If you want to read the original fairy tale, Henny Penny, click here.
The problem with these headlines is the overly short-term perspective. Yes, the market was down for the week — but why should that matter to a serious investor?
If you’re making decisions based on the past five days of market activity, you’re going to need more than luck.
Trading on such a short-term time frame is not only difficult — it’s almost impossible to do consistently.
In my decades on Wall Street, I haven’t met anyone who consistently made money trading on weekly trends. Not one.
Let’s put these “worst week” headlines in perspective. Year to date…
- The Nasdaq is up 11%.
- The S&P 500 has climbed 13%.
Stocks, like trees, don’t grow to the sky.
Don’t confuse an acorn for a stock market collapse.
Occasionally, they take a breather, pull back and then resume their upward march.
Understanding this simple fact can help you brush off short-term declines and focus on the bigger picture.
Volatility is the price we pay for long-term returns — and it’s a price worth paying.
A Better Factor to Consider When Buying a Stock
A stock is more than a wiggle or jiggle on a screen.
It’s a piece of a business. And you are becoming a partner in that business.
Partner with a strong business led by a rockstar CEO … and volatility is just a blip on the screen long-term.
Amazon didn’t become a trillion-dollar company overnight. And boy, imagine buying shares of it in 1997 and holding through the volatility.
A $10,000 investment would be worth $23 million today.
And that’s because from day one Jeff Bezos realized one thing…
(Click to see what Jeff Bezos says.)
What’s good for customers, is good for shareholders.
THAT is how you create a company built to last.
Bezos was laser-focused on the three things customers want most: price, selection and convenience.
That’s it. Pretty simple, right?
To make that happen — Amazon broke down the traditional barriers between customer and retailer…
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Breaking Barriers
Amazon started way back in 1994 as an online bookstore.
But soon, Bezos would get emails from customers asking if he’d consider selling CDs … DVDs … and electronics.
Instead of ignoring the idea, he made it happen.
And get this — soon after Amazon began selling music and movies…
Bezos emailed 1,000 random customers … and asked THEM directly what else they would like to buy on his site.
Can you imagine any other CEO doing such a thing?
But the customer answers became a turning point for Amazon…
Because Jeff Bezos soon realized that he could sell anything — that there was nothing standing in the way of Amazon becoming the “everything store.”
And more than that — he quickly realized that every new product he introduced made his customer base that much larger…
The more products he offered … the more customers would come in.
And that was the beginning of one of the greatest business success stories of all time.
Amazon was constantly innovating to improve the customer experience.
In 1995, Bezos allowed customers to post their own product reviews … even negative ones. This helped create a “community of trust” in the products Amazon sold.
And I have to admit — when I’m looking for a particular item — the first thing I do is scroll down and see what other customers have to say about it.
In 1997, Amazon patented the game-changer for e-commerce sites…
The “1-click” order button — enter your personal information once … and you never have to enter your details again … now EVERYTHING on Amazon is just one click away.
Then, a year later, Amazon let customers see third-party products side by side with Amazon products … to make sure they’re getting the best product at the best price.
This opened the door to more and more third-party vendors — further expanding the products Amazon offered.
Today, Amazon itself sells over 12 million products.
But if you add in the 9.1 million third-party sellers … there are over 353 million products on sale.
And in 2005, Amazon introduced Amazon Prime — where, for $79 a year, members could get unlimited two-day shipping for free…
And that includes access to services like Prime Video and Amazon Music.
I’m IN for Life
I’ve been an Amazon customer since March 10, 1998 … more than 26 years ago, and I’m a customer for life.
In fact, I looked up my Amazon order history and found the very first books I ever bought:
I asked the Banyan Edge team if they remember their first Amazon purchase.
Everyone said yes! And they told me about the video game, book or boots they bought more than 15 years ago.
Amazon is a part of our lives — because Bezos was obsessed with creating an incredible customer experience.
Now, let me ask you — what was the first item YOU purchased on Amazon?
Do you remember?
Well, if you don’t, it’s easy to find out right on Amazon’s website under “your orders.”
Once you’ve found it — click this link here and tell me … What was the first product you bought from Amazon?
And before you buy another stock, ask yourself, “Is this a business I want to partner with because it’s creating customers for life?”
If the answer is no, it’s probably not a stock that’s going to produce massive long-term gains.
Regards,
Charles Mizrahi
Founder, Alpha Investor
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