The Key to Wealth-Altering Gains in the Stock Market

I get asked all the time, "Doc, what's the key to big, wealth-altering gains in the stock market?"

The answer is less complicated than you think...

For me, big gains are all about two things: quality and patience.

Most investors want to buy stocks at the perfect time. They want to buy a stock when it's at an exact bottom and hold on for the recovery up. If a stock falls 50% and you buy, you'll earn 100% if it gets back to the price it fell from.

But timing the market perfectly is unrealistic. It's fantasy.

If your strategy is based off of calling bottoms and tops, you're in for a rough go.

What I do is simple... I buy great businesses and hold them for the long term. As long as my outlook and thesis about the company don't change, I keep on holding.

Obviously, you've heard this before. Every "Investing 101" class will tell you to buy quality stocks and be patient with them. But there's something that always seems to hold investors back...

The sin of investing, and we've all been guilty of it, is selling great stocks too early.

I'll go over three examples with you...

In my Retirement Millionaire newsletter, we have 10 open positions with triple-digit gains as I write. Six of those are above 200%.

Getting just one 200%-plus gain can give you plenty more comfort in your retirement. But having 10 big winners can change your retirement in a hurry.

The secret? Buying quality and being patient.

Take a look at Amazon's (AMZN) chart below. We recommended shares back in May 2017 when the stock was trading for a ridiculous 176 times earnings. We certainly didn't try to time our entry...

In fact, we recommended Amazon when it was trading at an all-time high. But we knew that Amazon had plenty of growth ahead of it and that it would very likely be a more valuable company in a few years than what it was at the time. We didn't let its valuation deter us from one of the greatest businesses of all time.

New high after new high, we've kept holding shares...

Our subscribers are now sitting on gains of roughly 220% in less than four years. And we think this position can run higher from here.

Now take a look at the chart of online-dating giant Match Group (MTCH).

From the time we bought in late 2017 to today, it has been anything but a smooth ride up...

It has been a volatile stock, but through all the ups and downs, we've held on. We didn't sell when we were up 100% because we knew Match Group had plenty more opportunity to grow its business and market share... We didn't sell when we were first up 200% or when it collapsed in March last year... and that's because our long-term thesis was still intact. Today, the position is up more than 420%.

One way to keep us in volatile stocks that we want to own for many years like Match Group is our sell-stop strategy. For most of our Retirement Millionaire recommendations, we use a 25% hard stop. That means if the stock falls 25% from where you bought it, sell it.

So if the stock does move higher and you have big gains, the hard stop allows for some volatility without getting stopped out – compared with something like a trailing stop where you may be forced to sell before you want to.

Basically, a hard stop means we rarely ever sell winners early.

And if a stock does fall 25% from our entry price, it either means we were wrong about the stock or we had horrendous timing.

Finally, take a look at Microsoft's (MSFT) chart. We obviously bought at a great time, right after the financial crisis. But for two years after our recommendation, the stock went nowhere.

Still, we held and were patient. It would have been easy to take profits when we were up 300%, 500%, or 600%... But we didn't. Our thesis was still intact. And it still is. We're not selling even though we're up more than 800% today...

We've also re-recommended Microsoft a couple times over the past few years. We were that bullish on the stock even after we made big gains since 2010. And readers who weren't able to buy back in 2010 could have bought in recent years and still been up big.

This is my key to making big, life-altering gains in the stock market...

Buy some of the best businesses in the world and let them run. And every couple of months, review why you originally bought the stock. If the story hasn't changed, keep on holding.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

Editor's note: When this bull market ends... and stocks start falling... will you know when it's time to sell? Steve recently shared his favorite system for cutting your losing positions and letting your winners ride – and he explained why it's absolutely crucial to start using it now. If you want to get the most out of your gains before the Melt Down arrives, check it out right here.

Further Reading

"Selling too early isn't limited to novices," Jeff Havenstein writes. Even veteran investors make this mistake all the time. So make sure you know what you own, and just as importantly, when to sell it... Read more here: The Expensive Education of Investing.

It's tempting to sell your stocks while they're trading near all-time highs. But today's market is showing us that higher highs are possible. So make sure you aren't selling before it's time... Get the full story here: Why the 'Groundhog Day' Trap Could Ruin Your Investments.

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Market Notes


Today, we're taking a look at "the world's best business"...

Regular readers know our founder Porter Stansberry has singled out the only kind of business he hopes his kids will invest in... and that's property & casualty (P&C) insurance. These companies collect premiums from their customers and, with good underwriters, aim to pay out less than they bring in. In the meantime, they can invest the money they hold (called "float").

W.R. Berkley (WRB) is a great example... It's a $13 billion insurance giant, mainly focusing on commercial P&C insurance. It succeeds by growing its book value and return on float. And although its profits suffered in 2020, this business is back on the upswing... In the latest quarter, W.R. Berkley increased its book value per share by 6.1% before share repurchases and dividends. And its quarterly investment income grew 32% year over year.

As you can see, WRB shares are climbing, too. After falling with the rest of the market last year, they're now up more than 75%, just below their pre-pandemic all-time highs. And as a key player in "the world's best business," we expect that trend to continue...