Our thoughts on the whole “timing the market” approach? In the wise words of Paul Samuelson, “investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas”. Many people shy away from the stock market from the fear that it’s too risky. They think the only way to make meaningful headway is to: (a) have lots of money, and (b) take lots of chances with that money. The reality? You don’t have to “bet it all” to be a successful investor. You can methodically grow your nest egg and live well in retirement by being totally average in the investment world.
Putting your money to work for the long haul wins out in our opinion. Here’s why:
Reason #1: Nobody knows for certain what the market is going to do. Nobody.
In theory, the ideal way to invest is to buy when the market is low and sell at the high. Makes sense right? You want to buy at a discount (it’s on sale!) and sell at a premium (you made a profit!). Still the question remains: When is the market at its lowest, and when is it at its peak? There are plenty of very smart people out there analyzing, theorizing, and strategizing. There are also plenty of financial advisors who say they know what’s going to happen. The not so big secret of the investing world? It’s all educated guessing.
Reason #2: Time is on your side.
Building up enough wealth to retire comfortably usually takes your entire adult life. It’s a marathon, not a sprint. The stock market will go up and down a lot in all those years. You can ride that roller coaster for decades and still come out on top so long as you focus on your goals while saving consistently. What the market does on any given day typically has minimal significant impact on your long-term financial wellbeing. What WILL have significant impacts are your saving discipline and goal-oriented mentality.
Reason #3: The beauty of compounding interest.
Compounding interest is arguably the most important financial concept to wrap your head around. Need a refresher? You put money into the stock market. That money starts earning interest. If you leave the money alone, the interest will also start earning interest. And your initial investment grows even more quickly over time, like a snowball rolling downhill. Steadily adding more money to the pot makes the power of compounding interest even stronger.
Reason #4: Being “just okay” can work just fine.
You hear tales of investors who made huge sums of money by “timing the market”. They picked the perfect company, bought at the perfect time, and sold at the top. Who you don’t hear about nearly as often are the other people. The ones who make knee jerk decisions based on emotion and lose out on substantial gains. The good news? Being an average investor may likely be all it takes to reach your goals, if you remain disciplined with your saving and spending habits. The people who have the toughest time making ends meet when they’re older are those who didn’t save enough when they were young. Start saving and investing now and put the stock market to work for you.
Interested in learning more about our unique approach to investing and financial planning? Don’t hesitate to reach out.