If you only read the news, you’d expect the stock market to be way down this year. All we hear about is inflation, recession risk, losing the reserve currency, and so on. But the market doesn’t care about your list of worries. It’s driven by the collective growth and profits of all the corporations of the world (or the US in the S&P 500’s case).
Are we saying the stock market is going to do great the rest of this year? We have NO freaking clue. None of this tells us anything about what is going to happen for the rest of 2023. But it really doesn’t matter what happens in any given month or year. To build wealth, you must stay invested for long periods of time.
There will be many bumps during your investing career that feel terrible. Since 1950, 29% of the years have been negative. But if you are a long term investor, all of this works in your favor because the market has returned 10.5% a year during this period, including dividends. Long term investors have always been rewarded, no matter what happens in the short term.
Where does this leave you? Don’t get overly excited during great markets and don’t get overly pessimistic during down years. Stick with your investing game plan and keep buying more shares of low cost index funds regardless of what the market is doing.
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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