By Craig Erwin, Ph.D.
“Just how safe is the stock market right now? Here’s what history says” This was the headline for a March 20, 2023 Motley Fool article.
If you read financial headlines, you will often be advised to wait to invest until a better time. Often, a professional money manager is the source of this advice. You may be told to wait until assets like stocks are cheaper or until there are more opportunities, until markets are less volatile, or until the economic outlook is less uncertain. This advice may do more harm than good for the average investor. It’s the sort of advice that might be good for a hedge fund manager, but not so helpful for regular folks. The best way for the vast majority of us to build wealth is to start investing as early as possible, to invest as often as possible, and to never stop.
What’s wrong with waiting to invest? If we wait until conditions are right (e.g., the economy is in good shape, the political situation is stable, stocks are cheap), we may never invest any money. We may spend the money or we may wait forever because conditions are never perfect; there are always threats. We may always find some cause for concern that will convince us to wait until the future is clearer or some thorny economic or financial issue is resolved. And if we wait until stocks are cheap, the news may be so disturbing that we will be too terrified to invest.
I have a friend who is always sitting on the sideline waiting for stocks to get cheaper so he can dive feet-first into the market. He has missed the opportunity to earn good returns because he is rarely invested, always hesitant, waiting for a better time to buy. Instead of seeing his money grow, my friend has seen it stagnate because he has almost always been too afraid to invest in stocks, fearing they are too expensive. And there are millions like my friend. It is very easy to earn returns better than the ones my friend gets. Why? Because he is almost always sitting in cash, rarely invested. He should jump in and stay in and forget about waiting for the perfect time to buy.
So, start saving and investing regularly (e.g., every paycheck). Start now. And don’t stop investing no matter what you hear or read. Don’t pull your money out so you can keep it safe. The best way to accumulate wealth is to just keep saving and investing, come hell or high water.
Are you investing regularly? Do you worry about economic and financial changes?
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