Are you investing in the stock market? If you have a 401K or Roth IRA setup then chances are yes, you are invested in the stock market. Some people wait SO long to invest while others may completely avoid it out of fear. Instead they put their money in savings, annuities, or CD’s/Money market accounts. If you don’t invest in the stock market it will be hard for the majority of people to grow their money enough to comfortably retire in the future.
I’ve had some ups and downs since I began investing in 2012. Some were great days & some were gut wrenchingly awful days. One day I got see my see my E*Trade account drop 30%. I remember punching my steering wheel driving into work I was so mad. On a side note, really glad the airbag didn’t come out and get me. That wouldn’t have helped matters. As bad as my day was it was not as bad as Steve Jobs worst day in the stock market. The decision ended up costing him 2.3 BILLION dollars! Yikes….
The point is there will always be down days in the market. If you have a plan for your investment accounts you shouldn’t need to worry about daily changes.
Historically investing in the stock market is a good bet. The S&P 500 Index has returned on average 9.7% between 1930-2013 (MarketWatch). If you’re about to begin investing or already are I highly recommend creating your own set of rules so you don’t PANIC. I believe it is crucial to make a set of rules for your investments. Everyone is prone to more or less risk than others so they might be slightly different for each person.
What kind of rules?
Here is an example of list I’ve created for myself, printed out, and look at frequently.
Have An Emergency Fund
Do you have an emergency fund of 3-6 months worth of cash stashed away for emergencies? If the answer is yes, then read on to start or continue investing. If not, maybe hold off investing to much in the near term. Learn why you need an emergency fund here. If you don’t have an emergency fund you might need to cash out of your investments suddenly. This can make you sell your positions at a bad time, potentially losing money instead of being able to wait out the investment. Don’t invest without any moved saved, at that point it’s not investing. It’s basically gambling.
Have A Plan
Do you have a plan for your 401K or Roth IRA? These are both retirement accounts and are not suppose to to used until you reach your retirement age. If there is a bad day in the stock market don’t panic! You figure if you are in your 20’s or 30’s your portfolio will have another 25+ years to correct. Don’t shuffle your investments or make any big changes if the market has a few bad days or weeks. Your retirement isn’t for a few decades, play the long game. Not the short game! Be like Warren Buffet 🙂
Don’t Listen To Others
It’s so easy to listen to other people about investing, everyone has an opinion. Whether it’s Jim Cramer screaming at you through the TV or coworkers in the company kitchen. Choose to block out the noise. Don’t listen to people because they are older, think they are wiser, or the next Wolf of Wall Street. Following the herd is a TERRIBLE mentality when it comes to investing. If you have a plan, as established previously, no one will influence your investing decisions!
If another recession came tomorrow I would accept it and would invest like crazy! Instead of viewing a market crash as a negative event choose to look at it as a buying opportunity. Remember the stock market has returned roughly 9% returns consistently over the past century. In 2008 – 2009 most people were selling stocks in a pure panic. By panicking some of these people delayed retirement by years.
If you had went opposite route and chose to buy these stocks at a low price you would have earned incredible returns.
According to Investopedia here is a breakdown of a $10,000 investment:
Imagine you had invested $10,000 at the bottom in 2008. The results you find below might not blow you away on an actual basis, but the amount invested is all relative based on your financial situation. It’s the percentage gain that’s more important because that number is going to be the same for everyone – assuming investors poured money into the market at the exact same time for this hypothetical situation. In addition to looking at how much money you would have made, we’ll also take a brief look to see if the same kind of return is possible over the next eight years.1,883 – 676 = 1,207
1,207 x 15 shares = $18,105 (net)
Not bad for a $10,000 investment. And this doesn’t include the dividend yield, which is always changing, but currently stands at 2.33% for the S&P 500.”
Don’t gamble with your hard earned money. Be boring. Hit singles and doubles, there is no need to gamble with your retirement money by trying to do to much. You still have 20-3o years before you will touch your retirement savings. By investing now you will be taking advantage of compound interest, your greatest asset. Don’t feel like you have to hit a home run to retire big. Be consistent and win big.
Have you panicked during a bad selling day or week? Do you have a set financial plan with your retirement accounts? Let me know in the comments.