What we’re going through is scary. On many levels.
As an investor, it’s been stomach-lurching. And so I keep reminding myself of three things:
We’ve recovered from every recession and depression. Some have been longer; some have been shorter. But we’ve recovered from every one of them, and the economy has continued to grow.
Time has been your friend. We’ve also recovered from every “bear market” in history. Some have been longer; some have been shorter. But consider this: You could have invested in the stock market on any given day since the mid-1920s, and if you had stayed invested for 15 years, your chances of a positive return historically were 99%.
Stillness is your other friend. Remember the research that women are better investors than men? That’s because women more often do what so many professionals (Ellevest included) advise: Invest according to a plan — and then leave it alone.
Of course, it can be tempting to “do something” when markets are volatile.
It’s natural to think about buying certain kinds of investments or avoiding others. Of course. But if you act on that, you’re essentially making the bet that you can “outsmart” the thousands upon thousands of Wall Street professional investors and traders whose full-time jobs are to do the research and then make the investing decisions that in turn set the market prices.
You are essentially betting that you see something — say, that the stock of Amazon is overpriced, or that smaller companies will likely be negatively impacted in a pandemic — that those full-time professional investors don’t.
And by the way, those full-time professional investors also tend to make mistakes. Too often, they don’t invest according to a plan and leave it. They aren’t making friends with stillness.
If you’re struggling right now to make ends meet, that’s different.
You’ll need to press pause on your investment contributions, cut back spending to the essentials, consider your options for getting by for now, and start thinking about how to recover from the effects of this pandemic. And that’s the right thing to do.
Whether you’re OK to keep investing now or need to hold until later, I hope you’ll remember this: In good times and in bad times, making that plan and then sticking to it for the long term is a way to build something for yourself that doesn’t depend on the job you do or don’t have right now, or what the economy is or isn’t doing right now.
I may be wrong, but history tells me that this downturn will one day — probably not soon enough, but one day — join the other downturns as blips in a long upward trend of economic growth.
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