Investing in the Stock Market is a Course in Staying Patient.

There’s an old saying that goes something . . . . Well, maybe it’s not that old. But it goes something like this. “You only get hurt on a roller coaster if you jump off.” And while you can’t actually jump off of a roller coaster, because you’re strapped in and restrained, you can get hurt financially speaking if you jump off the investing roller coaster.

Before we continue, there are a few things we need to establish. The first involves the stock market and the nature of the market. And the second is the assumption that you are regularly investing. If you are not invested in the market, either in your retirement plan or otherwise, then this article doesn’t apply directly to you.

The Nature of the Stock Market is Like a Roller Coaster.

Let’s recap the realities of investing. I have written a previous article about the fluctuations and volatility of the stock market. The main thrust of that article is the market goes up and down like a roller coaster. And while it is always changing, over time it generally goes up.

Over the last 100 year history of the stock market there have been eight major crashes. And yet when you average the returns of the stock market as a whole over that same period, you get an average of 7% adjusted for inflation. So, despite the crashes, if you were invested for that whole time period, you would have have made boatloads of money. By the rule of 72, if you average a 7% return, you will double your money every 10 years or so.

Just remember, the market is always changing. And trying to figure out how it will change in the future is something that even the professionals don’t know how to do. So don’t worry about timing the market.

The Benefits of Regular Investing

Instead you should worry more about regularly investing.

This may be overly simplistic, but you won’t have any money in your investment accounts if you don’t put money in. In the beginning, a 7% return doesn’t amount to a lot of money, dollar wise, when you only have $1000 in your account. You’ll only earn $70 per year. And while that’s nice, it won’t matter much initially. What matters more is saving more. If you can put an extra $50 per month in your investment account, in a year you’ll have saved $600. Which is of course a whole lot more than $70.

In the first decade or so of your investing, regularly saving will affect your account balance more than your earnings. It’s only when your account grows to hundreds of thousands or more that your money starts to earn more than you put in. This tipping point is exciting, because now your money is working harder than you do.

So, save, save, save! Invest early and often.

Stay the Course

And lastly, stick with your plan. We know the stock market fluctuates. It is always changing. There are many variables that cause the market to rise and fall. And while some outside influences have more predictable effects on the market, most of the things that cause the market to change are outside of you and I’s knowledge and control.

The best thing that we can do is, evaluate your portfolio. Have you implemented a plan that you are comfortable with? Is the risk level in your portfolio appropriate for you? If so, stick to it.

Don’t worry about the bear market ahead, or the current bull market. Don’t waste your time fretting about your current returns. Stick to your plan, and keep investing.

Don’t decide to back out when it gets tough. If you sell off your investments when times are hard, you’ll have locked in your losses.

Remember, you didn’t actually lose money if you don’t sell. Wait it out, and stick with your plan.

Final Thoughts

The market can be crazy at times. You never know what it’s going to do. You can’t control the market fluctuations, but you can control your investing behavior. Stick with your plan, and don’t sell just because you’re “losing” money. Remember that you only lose money when you actually sell.

Don’t jump off the roller coaster just because it’s going down. Regular investing and saving, especially early on, will beat any market returns. Keep saving!!

Are you nervous about the current market conditions? How is your plan faring?

Let me know about it the comments, and thanks as always for sharing and for reading.


Chris is the original Cash Dad. He's a father of 3 and a mechanical engineer by trade.

1 Comment

  1. A lesson in patience for sure. I am looking forward to enjoying the benefits of our investing during retirement. That is, as long as you let us spend it. 😉

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