In a deflationary background as the one described in the Japanese crisis and as the one that we are experiencing in Europe and Italy in last years, it is necessary to invest in “cash flow” that is to say those activities that produce a more or less constant profit flow which is shared with all the investors.
The Japanese graphic.
In the chart you can see that if we had invested in 1992 (although with a good price level) we would not have got profit for almost 25 years.
But if we had bought activities that shared a paltry 4%, we would have doubled the capital during the same period (4% in 25 years = 100%).
In both cases, even though you well invested in 1999 (blue circle) and you kept the stocks, your profit would be very negative.
It is true that the value increased in the first period but you had to sell in the right moment, while the companies shared profit which is real money that can be invested again.