The stock market has been a great place for optimists to grow wealth—especially over the past two years.
Between December 7, 2022, and today, the S&P 500 has delivered approximately 60% returns.
But here’s the thing—despite the market’s strong performance, I suspect many investors watched from the sidelines and missed out on this rally.
Why?
Because every time I mention buying stocks, I inevitably get emails warning me to be less “myopic,” backed by clever-sounding, pessimistic reasoning.
The seduction of pessimism
Pessimism is seductive. It sounds intelligent, grabs attention, and often makes you feel like you’re the only one “seeing the bigger picture.” But the truth is, while perpetual bears occasionally get their moment, just like a broken clock is right twice a day, history shows that caving into the seductive sirens of negativity isn’t great for your portfolio.
In the long run, most of the chatter in the market is just noise.
However, that doesn’t mean living life based on the rosiest scenario either. You should invest like an optimist but structure your finances like a pessimist.
This means building financial resilience that can withstand market volatility, economic downturns, and personal setbacks. Such stability enables clear thinking, preventing the need for forced moves during challenging times.
Because when it comes to investing, your success is tied to the quality of your decisions. And if your back is against the wall, you’re more likely to make rash, subpar choices.
Stay grounded in a bull market
Most investors behave like they’re still in high school—gravitating toward the “popular kids.” In the stock market, this translates to piling into recent winners or the latest hot stock plastered all over the headlines.
But these rarely work out.
Because by the time a stock becomes a media darling, optimism is already baked into the price.
Personally, I prefer buying businesses facing temporary hiccups.
But not just any business. I look for steady compounders—companies with:
- A durable moat (even if temporarily breached),
- A long runway for reinvestment, and
- The ability to reinvest at attractive returns.
These businesses are true wealth generators over the long term.
The catch? They rarely come cheap, and when they do, most people don’t want them because of the negativity that surrounds them.
Why I prefer Steady Compounders
While buying undervalued companies and selling them once they revert to the mean can be profitable, it’s a labor-intensive strategy. It requires constantly searching for the next opportunity.
When investing, I prefer to make fewer buy-and-sell decisions, which reduces the chance of unforced errors.
Steady compounders, however, are long-term wealth machines that do the heavy lifting for me. Because they can reinvest capital at high returns, they save me the headache of constantly having to redeploy my capital.
Swinging when the odds are in your favor
This year, I picked up Lululemon, Paycom, and PayPal shares at discounted prices. These weren’t easy buys—they were dealing with real problems, which made them unappealing to most investors.
I discussed these ideas in multiple talks and on the radio in July, but most people were more interested in hearing about the hot stocks of the week than beaten-down opportunities.
Of course, Steady Compounding Insider Stocks members got first dibs with in-depth reports that allowed them to understand these businesses in greater detail than I could cover in a short interview or panel discussion.
Since then, these stocks have surged between 40% and 70% as sentiment shifted and the market realized things weren’t as bad as they seemed. But valuations become dear when the coast is clear.
The key to seizing these opportunities lies in having differentiated insights—spotting what others miss and recognizing when the market has overreacted.
While these investments worked out well (so far), none of them were sure bets.
Nothing in investing ever is.
Investing isn’t swinging at every pitch but waiting for the right one—when the odds are firmly in your favor. In other words, swing when the risk-reward ratio looks favorable.
Some investments will perform well. Others won’t. But over the long haul, as Peter Lynch famously said, if you get six out of ten correct, you’ll do just fine.
Compound steadily,
Thomas
Disclaimer: These research reports constitute the author’s personal views and are for educational purposes only. It is not to be construed as financial advice in any shape or form. From time to time, the author may hold positions in the stocks mentioned below that are consistent with the views and opinions expressed in this article. Disclosure – I hold a position in Paycom, Paypal, and Lululemon at the time of publishing this article (this is a disclosure and NOT A RECOMMENDATION).