I’ve had a lot of new investors ask, “what if I invest and I lose it all?”. And the answer is, if you’re buying and holding index funds, that’s not really possible.
An index fund is a slice of the entire market. So if you “lose it all” in an index fund, that means there has been a total and complete nuclear economic collapse. No Google, no Amazon, no Ford, no Exxon Mobil, no Walmart. Probably no government. In this scenario where no businesses exist, paper money and savings accounts would be worthless too.
I can’t tell the future, so I don’t know if that will ever happen, but I know that if it does you’re no worse off investing than you would be in a savings account since they’ll both be worthless.
Those that do “lose it all” are doing highly risky stuff like investing borrowed money or betting against the market. Index funds don’t carry those risks.
When the news makes a fuss about a “market crash”, they’re talking about short term volatility. It goes down by 20% or 30% like it did last March. But if you don’t sell, you still own every one of your shares and those companies you own will still be profitable and go up in value over the long term. Like it did the rest of the year (we’re once again at record highs, like we usually are).
So don’t let the fear of short term volatility keep you out of the market and make you miss out on huge long term gains. :)
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
This is the first in a series of “how to get rich” where I show you how to get rich in different places or with