With the recent volatility of the market, I thought it would be a good time to remind everyone to think long term. Yes, we’ve had a big down and up this year. And in response you may want to jump in and out of the market to try to avoid future downturns. But when you take a step back and look at the long history of the market, you’ll see that the market goes UP.
$100 invested 100 years ago is worth over $2 million today. But only 65% of the months in between are up. That means it feels kind of like random ups and downs along the way. But it’s impossible to consistently predict which months are which as you go along. And if you start missing some of those months, you’re more likely to miss gains than you are to avoid losses.
So I don’t know what is going to happen during the rest of 2020 or even the next five years. I’m sure we’ll have some down months and some up months. But if you stay the course, invest early and often and hold for decades you will be WAY up. You want your $100 on that winding path to $2M! Don’t let it say $100! :)
Note that this chart is on a “logarithmic scale”. That means a 10% drop today looks the same as a 10% drop 100 years ago. That’s why the coronavirus crash looks so small. And also makes you realize how big the great depression was. (The BIG drop starting in 1929)
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
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