Even when the market struggles, there are healthy profits to be made.
It is a truth universally acknowledged that the last decade has been a stinker for shares. Anybody expecting to be in possession of a good fortune after such a turbulent time must be in want of a few marbles.
After all, didn't the benchmark FTSE 100 almost hit 7,000 in those heady pre-dot.com crash, pre-9/11, pre-credit crunch days, only to end up 10 years later sniffing around 5,500 (by way of an unpleasant detour to 3,200)?
Surely the average investor must be 22% poorer after such a dismal decade? Which means that all you Fools out there would have been better off stuffing your money under the mattress rather than worrying your heads about dividend yields and price/earnings ratios.
Wouldn't you?
Pep talk
But when I look at my portfolio, it ain't like that. I didn't lose money in the last decade, in fact I made quite a lot of it. And no, that's not because I'm an investment genius, with the secret formula to beat the market.
Let's start by taking a look at my portfolio. At the turn of the millennium, I wasn't even investing in direct equities, most of my money was in investment fund Peps, and there wasn't much of that.
I owned a quartet of Jupiter investment fund Peps after investing regular monthly amounts during the late 1990s bull market, and even after the dot.com crash, they were still showing a slim profit.
And that's the first lesson. Dribbling regular monthly amounts into the market means that all your wealth won't suddenly be swept away if the investment tide turns against you.
It's all about the divi
Of course, if I had dumped all my money into a FTSE 100 tracker on 31 December 1999, right at the top of the market, I definitely would be 20% poorer by 31 December 2009. Or would I?
The FTSE 100 fell by 22% during that time, but even somebody who bought a tracker at the top of the market would have made money. Once you factor in reinvested dividends, the FTSE 100 delivered a total return of 13%, before costs. Not exactly great, I know, but not as disastrous as many people claim.
That's the second lesson. Never forget the magical power of dividends. Do Dividends Matter? I think so.
Pain in the tech
Like many of you, I took several pastings over the past decade. The most painful came when I got bored of missing out on the technology boom, and threw a load of money in just before it went bust. I mean, about a week before it went bust, right at the end of March 2000. My stake in Aberdeen Technology subsequently fell about 60%, Aberdeen European Technology fell 80%. And they never recovered.
Like many investors, I lost heart. And that turned out to be a good thing, because markets trailed down for about three years, before the FTSE 100 hit a low of 3,287 in March 2003.
As it picked up again, so did I, and started throwing spare money into investment funds, choosing halfway decent managers such as Artemis, First State, Invesco-Perpetual and Jupiter. As I became more experienced, I moved into emerging markets investment trusts. Nearly all those funds are up between 50% and 90%, and one or two have hit 200%.
And that's the third lesson, nobody puts all their money in at the top (or bottom) of the market, but at various points in between. So drawing a straight line between a couple of dates 10 years apart is nonsense.
Time is on your side
Although my portfolio fell heavily in autumn 2008, I cashed in on last year's rally. For once, timing was on my side, and I invested a tidy sum in the iShares FTSE 100 exchange traded fund (ETF) in February. As my confidence and markets grew, I made good money from Aveva (LSE: AVV), BP (LSE: BP), Tesco (LSE: TSCO), Vodafone (LSE: VOD) and investment trust Scottish Oriental Smaller Companies (LSE: SST).
And that's the final lesson. Falling stock markets aren't always bad news. I don't enjoy them, but I have often reaped the benefit. Provided you don't crystallise your losses by taking out your money at the bottom of the market, or get badly burned by a stock that goes into meltdown, the opportunities more than balance the threats.
So if I can make a decent return in what was a dismal decade for stock markets, I'm reasonably confident I can turn a profit in the next 10 years.
More from Harvey Jones:
> Retire early, retire rich! We've identified two FTSE 100 companies that could help do just that in this brand new FREE Motley Fool special report -- click here for instant access.
> Harvey has an interest in Artemis UK Special Situations, Invesco-Perpetual Income, Jupiter Financial Opportunities, Aveva, BP, Tesco, Vodafone, iShares FTSE 100 and Scottish Oriental Smaller Companies.
