Money Meetup Zom Session
Investments
by Paul Stephan
Zoom link: https://us04web.zoom.us/j/5908206530
Hey everyone,
Welcome to the worst January for the US stock market since 2008. Is it time to panic and sell? Nope. This is all part of long-term equity investing. There is no reward without risk, and for those that can sit out these volatile times with calm and not sell, you will be rewarded handsomely over time.
The market has been positive for 40 out of the last 50 years, and a passive buy and hold investor who let their money sit in the market (didn't sell) during that time would have been rewarded with an average annual return of 10.9%. A $10,000 investment put into the S&P 500 in 1972 (50 years ago) would be worth $1,764,320 today, and someone who invested just $100 a month, every month during those 50 years would have $2,489,190 today!! Granted, $100 was worth a lot more in 1972 than it is today, but the math still works out.
Stock market crashes and volatility are part of investing. If you want zero volatility, you can put your money in a savings account and get a 0.1% rate of interest. But for those of us who want to build wealth over the long term, we accept the volatility in the short term and are rewarded with a dramatically higher rate of return. Do you want high returns and low risk? That doesn't exist. That means we only get the high returns in exchange for accepting this volatility.
Is the 10% drop we experienced over the last couple weeks going to be the worst we see this year? Or are we going to see another big one like in 1987, 2008, or 2020? I have no idea. If I could answer questions like that, I'd be a billionaire, not a millionaire (yes, I'm still above 7 figures, even after the dip). But I do know that buying and holding index funds guarantees you your fair share of all market growth. Buying assets that provide dividends and go up in value result in the wealth-building magic of compound growth. Stay the course.
On average, the market will see a 10% or greater drop once a year. Stocks always crash, but they will always recover. And if they don't, well, then all this money stuff will be worthless anyway because the economy as we know it won't exist and we'll be back to barter as a medium of exchange. Take a look at the images below (or attached?) for some more motivation.
Join me on Sunday at 3 pm to discuss this or any finance topic you wish, and have your money questions answered.
Zoom link: https://us04web.zoom.us/j/5908206530
As always, spend less than you make and invest the difference.