A stock market crash is coming. I’m sure of it. The problem is, I don’t know when. It could start tomorrow, or it could start another 10 years from now. Worse yet, when it does arrive, I don’t know where the bottom will be. After the market drops 20%, is that the bottom or are we on the way to a 50% drop? I won’t be able to tell you until the crash is well behind us.
Predicting that the stock market is going to crash is kind of like predicting there’s going to be tension in the Middle East or that Tom Brady is going to win another Super Bowl. We all know it’s going to happen, it’s just a matter of when and how. In fact, stock market crashes are PART of investing. That risk involved is exactly what allows us to get such great returns (10% average over the last 100+ years). If you don’t want any of that risk, you can put your money in the ironically named “high yield” savings account, for an incredibly low yield of 0.5%. But those who are willing to weather the storms are rewarded handsomely.
The moral is don’t try to time the market. Don’t hold back cash waiting for the crash. Don’t buy the dip. Invest the money when you get it. Leave it for decades. Don’t sell anything until you retire. That’s how you get rich.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.