If investing was a ride at Disneyland, it would be the most nauseating roller coaster in the entire park.
New investors often come to us and say something along the lines of, “I started investing four months ago and I’m LOSING MONEY!!” They might even get discouraged and stop investing.
People sometimes think investing is a smooth, predictable journey. The reality is, on any given year, it is anything but predictable. It’s a super bumpy journey that is impossible to predict. The most sophisticated investors in the world, with every resource at their fingertips consistently fail at forecasting what will happen in the stock market in the coming months.
What we do know is that the stock market has a long term track record of generating positive returns to those who are patient. In fact, we used 10% in our example because that is the historical compound annual growth rate of the S&P 500, including dividends. The S&P 500 may be up 30% some years and down 30% other years, but the growth rate over time has been about 10% per year.
Whatever you do, don’t jump off the rollercoaster ride. Investing only works when you stay the course. You should keep buying low cost index funds until you retire and then you can happily live off of your investments. But, until then, don’t pay any attention to the ups and downs of the market. Just keep investing and you will reap the rewards of being patient.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Vivi & Shane
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