This is a common, and completely understandable, sentiment I often hear from people who are nervous about investing in the stock market.
Whether it’s a global pandemic, a war, a real estate collapse, a recession, or other unpleasant event, feelings of anxiety and fear can give anyone pause when it comes to investing their money. Wanting to wait until things settle down is a completely human and normal reaction.
My response is always, “How will you know when things settle down?”
When the war is over, when the pandemic ends, and when the stock market starts going back up?
Understandable human reaction, but what you are really doing is Selling Low/Not Investing (when the bad events are happening, the stock market is down and prices are low) and Buying High (after the bad events end, the stock market goes up and prices are high) which, of course, is the opposite of what we want.
And throughout history things have never “settled down” permanently — we have lived, and likely always will live, through a series of ups and downs.
But there is a cost of avoiding investing because of fear or inertia. When stocks go up, they often do so suddenly and quickly.
For example, if an investor put $1k into the S&P 500 (the 500 largest American companies) from 1990-2020 but missed the best 25 days in the market because she was waiting for things to settle down. She would have $4,376 at the end of that 30-year period. Not bad. She quadrupled her money!
What if she had been invested for the entire time, riding out the tough times? She ends up with $20,451.
The job of your investments in the stock market is not to slowly go up a little each month or year (though that would be nice!). It’s to grow as much as possible to meet your retirement and other needs. But the price of that growth is the investor has to endure the short-term uncertainty and volatility of the world we live in.
I remember speaking to a recent retiree several years ago during a volatile time in the world. We began talking about investing in January and I followed up with her later that year. The previous weeks had seen a slew of bad news and the markets were very volatile during that month. I’ll never forget her response when I asked her if she was ready to invest.
“No and I’m really glad I didn’t given what is going on right now!”
Had she invested her money with us in in January, she would have been up 10% even with the volatile month.
If you are ready to invest, please contact us today.