It never ceases to amaze me.

The stock market has gone up 75% of the time over the past 40 years.

Yet most investors have done considerably worse.

You would think it’s a no-brainer, right?

Just buy an S&P 500 Index fund, and your money will grow.

But such is not the case.

Investors are always finding ways to be their own worst enemy.

And I totally get why…

Thick and Thin

Because each year, on average, the stock market falls 14% intra-year.

You can see below that in almost every year in the past four decades … stocks had intra-year drops of as little as 3% and as much as 49%.

Annual returns and intra-year declines

And those drops scare the stuffing out of most people.

For example, at the end of 1987, the S&P 500 closed with a 2% gain (5% if you include dividends).

But most investors lost money…

That’s because at one point that year, the market dropped 34%.

If they’d just bought, held and paid no attention to the volatility, they would’ve come out ahead.

A study by Dalbar also showed that investors have trouble sticking with their positions through thick and thin.

The Dalbar Study: 30 Yr Average Equity Fund Investor vs Indexes

The S&P 500 returned more than 10.6% over the past 30 years.

Yet, the average stock investor significantly underperformed and made a little more than 7%.

On a $100,000 investment, that underperformance cost them more than $1 million in profits.

Investors were their own worst enemies…

Roller Coaster

If you invest in stocks thinking you’re on a carousel, you’ve made a big mistake.

The stock market is more like a roller coaster that has steep drops and slow climbs.

And if you just ignore the day-to-day roller-coaster ride, you can sleep better and be richer.

If you can’t stomach the drops and downturns, stick to investing in a Treasury bill.

Here’s the Real Talk: There’s no free lunch on Wall Street.

Stocks have the highest returns out of any asset class because of the volatility…

You can’t have above-average returns with zero volatility.

If anyone promises you they can do that, then hold on to your wallet and run.

Time to Buy

I learned from Joe Rosenberg — the former chief investment strategist for Loews Corporation — that:

You can have cheap stock prices or good news, but you can’t have both at the same time.

In other words, you can’t have your cake and eat it, too.

Right now, the news is bad, and many stocks are cheap.

Mr. Market is full of doom and gloom over interest rate hikes and inflation. And when he panics, stock prices plunge.

So, many of our stocks are trading at bargain prices.

But that just makes now the time to be a buyer, not a seller.

It’s how you react during times of volatility that’ll determine how well you do over the long term.

Because over the long term, the stock price follows the economics of the business, not the other way around.

And right now, the businesses in the Alpha Investor portfolio are doing very well.

It’s just a matter of time before the stock prices follow the fundamentals of the business higher.

So far, I’ve shared with you why stocks are the best investment for the long term.

I also shared why most investors miss out on the outstanding gains that stocks return.

In my next Real Talk, I’ll show you why trying to time the market is the worst thing you could do.

What I’ll share with you will change the way you think about the stock market.

I guarantee you’re going to like it.

Charles Mizrahi

Charles Mizrahi

Founder, Alpha Investor