The third habit of a Rule Breaker investor -- Invest. For At Least Three Years. -- sets three years as the bare minimum for holding a stock, and we'd happily hold our best companies for decades.
The third habit of a Rule Breaker investor -- Invest.
For At Least Three Years. -- sets three years as the bare minimum for holding a stock, and we'd happily hold our best companies for decades.
In January 2022, Team Rule Breakers recommended Spotify(SPOT -1.22%) to Stock Advisor members at about $209 a share. By November, with the S&P 500 deep in a bear market, it had fallen to about $69, a drop of roughly two-thirds.
Drops like that are hard to sit through, and with economic headwinds possibly ahead, plenty of investors are wondering how to prepare for the next one. Our answer comes from the philosophy by which every analyst on Team Rule Breakers invests. It starts with accepting that bad years will come, and it ends with a portfolio built to hold through them.
Spotify's story didn't end in November 2022, of course, and we'll come back to it.
Bad Years Are Part of the Deal
Down years are common. Depending on how you count, the market has fallen in somewhere between one year in four and one year in three. Some of those stretches have been brutal, from the dot-com bust to the financial crisis and the COVID-19 crash. Each one also turned out to be a stop on the way to the stock market's long-run gains.
So, at The Motley Fool, we don't try to call the next downturn. Nobody knows whether it will arrive next year or a decade from now, but history suggests it will show up regardless. We spend that energy studying businesses instead. A falling market sometimes offers great companies at better prices, and that's where our attention goes.
The Rule Breakers' habits and principles are built with these stretches in mind. The third habit of a Rule Breaker investor -- Invest. For At Least Three Years. -- sets three years as the bare minimum for holding a stock, and we'd happily hold our best companies for decades.
The fifth habit -- 5% Max Initial Position -- helps keep a single stock's fall from doing lasting damage to a portfolio. The sixth principle of a Rule Breakers portfolio -- Review Quarterly, Manage Accordingly -- has us checking in on each business when it reports results so that a rough week in the market doesn't drive our decisions.
Averytin News Financial update.