Losing money really hurts.
The pain of losing $100 is much greater than the joy of making $100.
Behavioral economists call it “loss aversion.”
It’s hard to fight.
We’re hardwired to feel this way.
That’s why rational people act irrationally when they’re losing money.
And with the stock market off to its worst start since 1970…
A lot of investors are feeling the pain — and unfortunately, making dumb mistakes…
Rinse and Repeat
There’s nothing unusual about it.
It happens during every bear market, so it doesn’t surprise me.
But here’s how it plays out:
- Down markets freak out investors, and they sell off stocks.
- They wait on the sidelines until the market “settles down” again.
- A bull market is born, and investors are slow to get back in.
- Once they do buy in, they miss out on the big and easy gains.
I’ve watched this happen over the past five bear markets since I started on Wall Street in 1983.
It’s really that predictable. Investors rinse and repeat.
But I’m going to share with you something that I bet no one has ever told you about…
A Winning Hand
Time, not timing, is what matters.
The longer you stay in the market, the more likely you are to make money.
And here’s the proof…
Over the past 90 years, the S&P 500 has gone up, down and sideways.
Since 1927, the U.S. has been through periods such as the Great Depression, World War II, inflation, recessions, stagflation … you get the idea.
During all that time, the market had negative results less than 30% of the time.
In any one-year period, the stock market was up 73% of the time.
And in any three-year period, the market was positive 83% of the time.
Want to increase your chances even more?
Don’t do anything, and just stay invested.
Because over any 10-year period since 1927, the market was higher 94% of the time!
It ain’t rocket science…
Why turn a winning hand into a losing one?
The longer you stay in the stock market, the greater your chance of a positive outcome.
So, during times like these, I always keep in mind what Charlie Munger, Warren Buffett’s partner, advises…
Don’t do something, stand there!
The reason to stay in the stock market is simple.
If you own quality businesses, why the heck would you ever get out during a downturn?
Just one share of Coca-Cola bought when it went public in 1919, would now be worth more than $20 million!
Why bother trying to time the market, when it’s so much easier to sit on your butt and make money?
Besides, it’s crazy to try to think you can time the market.
Take it from me. I was the No. 1 market timer over a seven-year period back in the 1990s.
And I stopped trying to time the market.
You know why? Because it’s impossible to do.
I came to my senses close to 25 years ago.
Learn from my mistakes so that you can save yourself time and money.
And keep an eye out for my next Real Talk, because I’ll be sharing a key step in doing just that.
Founder, Alpha Investor