The top five reasons to stay in the stock market
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Yes it's ugly, but you need to stay in it!
Currently all the major market averages are down by more than 20% from their highs set late last year. The market is officially in control of the bears. Many individual investors have a hard time getting through these times. Already I have been hearing some say that they think they are not going to be able to take it, and they are going to have to sell their stocks and go back to a safer investment option. I'll be the first to tell you that now is not the time to be getting out of the stock market. While things may look horrible now (they do), the long-term picture is still intact.
The Top Five Reasons to stay in the stock market
1. Panic selling never helped anyone- There is no doubt about the fact that when we get bear markets and recessions there is a lot of panic on Wall Street. It is often said that the single reason that many people fail in investing their own money is because they panic when the market is down. I've heard countless stories of individuals selling at very low prices, only to see the market recover over the long haul and do quite nicely. Panicking in the stock market is the kiss of death.
2. Remember all the past conflicts that the market has made it through- There have been dozens of major threats to the economy as well as the stock market over the years, and the stock market has always made it through them. Why would this be any different? We've had The Great Depression, September 11th 2001, the dot com bubble, numerous wars, and many other major threats. Sure the markets get hit hard, but they've always came back stronger than ever.
3. The long term returns are second to none- Sure you can find safer investment options, but chances are you won't find a better long term performer than stocks. Take a peak at this chart, which shows you the dates that major milestones have been hit for the Dow Jones Industrial Average. The chart shows beautifully a series of higher highs and higher lows. The long term average return for stocks is around 9%. There are no safe investment options that can net you that kind of return.
4. With higher risk comes higher reward- You knew this going in, or at least you should have. The bottom line is that owning stocks is more risky than most asset classes, but it also typically comes with greater rewards. Right now it's easy to forget the rewards part, but you shouldn't!
5. You haven't lost until you sell- Checking your portfolio statements can be extremely discouraging, but realize that unless you own options or futures, you haven't lost your money until you sell. This is simply the current market price if you were to sell, not an actual loss.
During the midst of a bear market it can be tempting to get out of stocks, but the wise investor will sit through it and realize that better days are ahead!
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I have never ever had anything or knowledge about the stock market, but you have given me five good reasons to start !;)
Thanks;)
Dottie,
Yeah it is tough, but you have to!
Compu smart,
You should try to gain more knowledge in it, it's definitely a good thing to do in the long run! Thanks for the comment
i just wish i had more time, and at the moment time is money! but thanks for the encouragement, i will start looking more into this!
;)
We all need to write our Legislators and President with our personal stories of how the economy is making life difficult for us. We need to urge them to develop an financial policy, now, which includes getting out of the occupations of Iraq and Afganistan, nationalizing Freddy and Fannie Macs, strengthing our economy by investing in education and training and doing many other things to regain the respect of the world. Many of us in the USA don't understand how invading Iraq, based on false infomation and Bush's playing on some people's desire for revenge, has destroyed the USA as a becon of justice and equality. Keep informed. Read www.HuffingtonPost.com and take action. I'd wait to see who gets elected and what the new President proposes before getting into the stock market, if you are not in it. I've had some investments in stocks for about 30 years and only seen an average of 2% growth per year. I pulled out before the downturn of the last year and am glad I listened to the analyists and have the critical thinking skills to evaluate information. Look around your community. Are the signs good? No. I think there will be more bad news for at least a year. Then, if we don't have a depression and you are young, get in while stocks are low. I'm not a financial analyist, just a 60 year old, retired teacher, but I can "read the writing on the wall."
Coming from a professional trader (It's how I make my living) this is good advice.
Generally speaking, when everybody else is selling is the time you should be buying. The flip side is also true. When everyone else is buying, you should be selling.
It may take some thought to figure out the wisdom in the above statements.
Bob Diamond
I'm a college student who started in the market because a start up portfolio had been left to me by my late uncle. Ever since I turned 21 in the December of 09' I've taken control of my portfolio. I bought the majority of my portfolio in March of 2010' and ever since have watched the market closely as my investment has already increased substantially (58% including dividends). This goes to show you that timing is everything and you must be smart when deciding when to get in and out.
Good post to the author, now come up with one explaining what to do at the top of the market once you've sold your stocks and have that capital to invest some where else.
Great points. If you invest in solid companies there is no need to sell when the stock price drops because it will inevitably go back up.
Dottie1 3 years ago
I agree with you 100%. Ride it out, the rich and the experts do.