“[The stock market is like] an excitable dog on a very long leash in New York City, darting randomly in every direction. The dog’s owner is walking from Columbus Circle, through Central Park, to the Metropolitan Museum. At any one moment, there is no predicting which way the pooch will lurch. But in the long run, you know he’s heading northeast at an average speed of three miles per hour. What is astonishing is that almost all of the market players, big and small, seem to have their eye on the dog, and not the owner.”
Those are the words of legendary American investor, Ralph Wagoner. The analogy is clear: in the short-run, there 网曝吃瓜 鈥檚 really no telling if stocks will go up or down, but through decades of wars, recessions, elections, and revolutions, they have maintained a steady upward trend.
The only problem is us humans are always watching the dog, looking for moments of opportunity or signs of danger. This behaviour seems to be hardwired, and even the biggest and most sophisticated investors fall into the same traps we do.
If you 网曝吃瓜 鈥檙e worried about the stock market, try repeating these three money mantras (it doesn 网曝吃瓜 鈥檛 have to be out loud – don 网曝吃瓜 鈥檛 make it weird).
How long is long? Well, if you 网曝吃瓜 鈥檙e investing for five years or longer, there have been very few periods with a negative return. If you 网曝吃瓜 鈥檙e investing for 10 years or longer, there have been virtually no negative results. If you 网曝吃瓜 鈥檙e investing for 15 years or more, there has never been a period when major North American stock markets did not yield a positive return.
Here 网曝吃瓜 鈥檚 a picture of the largest U.S. stock market over the past 20 years. Despite the massive tech crash of 2001 and the global financial crisis of 2008, a $10,000 investment back in 1998 would still be worth about $35,000 today. The lesson? Be a long-term investor.
Imagine if you had invested the day before a huge bull market and sold the day before it crashed? Obviously, you 网曝吃瓜 鈥檇 be rich. But what 网曝吃瓜 鈥檚 not so obvious is that, even if you didn 网曝吃瓜 鈥檛 have a crystal ball and all you did was invest a steady amount every month through thick and thin, you 网曝吃瓜 鈥檇 still be rich.
The reason is something called dollar cost averaging. When you have a plan to invest every month no matter what, you 网曝吃瓜 鈥檒l pay more when the market is up, but you 网曝吃瓜 鈥檒l get a bargain when the market is down. When you average it all out, you 网曝吃瓜 鈥檙e going to do just fine.
You could have followed this strategy through all four major stock market crashes since 1972, and you 网曝吃瓜 鈥檇 have made more than 12 times your money by now. All you have to do is – especially when it feels uncomfortable.
You can 网曝吃瓜 鈥檛 control which way the market will go or when, but you can sure as heck do something about the investment fees and taxes that eat up more than half of most people 网曝吃瓜 鈥檚 money. You read that right – more than half.
Here 网曝吃瓜 鈥檚 a snapshot of the growth of a 30-year old 网曝吃瓜 鈥檚 retirement fund. If she picks mutual funds, she 网曝吃瓜 鈥檒l end up with around $700,000. If she chooses low-cost ETFs, she 网曝吃瓜 鈥檒l retire with well over $1 million. Want to see how much you could save? Try this handy tool.
When it comes to taxes, you 网曝吃瓜 鈥檝e got RRSPs, TFSAs, RESPs and a bunch of other acronyms to help you out. Choose the right ones, in the right proportions, and you could save additional hundreds of thousands of dollars.
The bottom line is this: focus on controlling fees and taxes, and fluctuations in the market will become even less meaningful.
We know, we know. Even if you watch the owner instead of the dog and chant these money mantras religiously, there 网曝吃瓜 鈥檚 still a deep part of us that freaks out when our investments go down in value. This is perfectly natural, and we 网曝吃瓜 鈥檙e always here for you if you want to talk about it.
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Track every category. Review every receipt. Color-code your life. Become the kind of person who enjoys looking at bank statements on a Sunday. For most people, that version does not stick. Not because they are bad with money. Because the setup is too fussy, too time-consuming, or too annoying to survive real life. A beginner budget does not need to be perfect. It needs to be usable.
Track every category. Review every receipt. Color-code your life. Become the kind of person who enjoys looking at bank statements on a Sunday. For most people, that version does not stick. Not because they are bad with money. Because the setup is too fussy, too time-consuming, or too annoying to survive real life. A beginner budget does not need to be perfect. It needs to be usable.
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