You can't time the market but can you time luck?

I'm very big on investing in solid companies delivering great dividends. As tempting as it can be, don't put too much in any one company. No matter how good, one cannot see the future. Even good companies fail. Think of Nortel.

My first rule: diversify.

My second rule: don't try to time the market. Do it once or twice and you may succeed. Why? Mostly luck. But do it with any consistency and you will likely lose as often as you win.

In mid November I created a Million Dollar Portfolio demo. It is up more than seven percent. A few weeks ago I created another demo portfolio. It is down something approaching two percent. 

Why the difference? Luck. I had no idea that the market would climb during the last weeks of 2020 and I had no idea that the market would tumble near the end of January.

I named my second portfolio for a niece of mine who is very wise when it comes to her money. I set up a demo portfolio to show her what can be done with retirement savings. I wasn't planning on showing her that it could be lost, even if  just temporarily. Oops!

But let's be honest. Temporary losses can last three years and can amount to a loss of more than 30 percent of your overall portfolio value. Losses hurt. But if you are in good, solid companies paying great dividends, the pain is more mental than real. Equities are far more volatile than dividends. The portfolio may lose 35% of its value but the income will not drop even half that amount. That is pretty well guaranteed.

Which brings us to our third rule: Buy low. As the market dips, continue to invest. You cannot time the market. Don't feel badly when it continues to drop after your purchase. That often happens.

Check out the graph of the TSX since the beginning of the century. Anyone investing in 2007 was in for a rough ride. These unfortunate investors were not back in the black for about two years and that didn't last. It was another two years before they climbed out of the charted financial valley.

Which bring us to our fourth rule: One in, stay the course. 

Staying the course is tough. I'll admit it. If it were not for Judy and her steely nerves, we would not have done anywhere near as well as we have. I've learned a lot from that woman.

Cheers! (With all the markets hitting new historical highs recently, a pullback seems almost certain. Keep those seatbelts fastened. 2021 could be an interesting ride.)