Do you ever find yourself unsure about what to do with an investment decision? Should you buy now or wait? Is this a good time? Should I buy something safe or invest for growth?
You are not alone. Most people struggle with investment decisions because they think short term and do not have faith in the market.
This leads them to make the single most common investing error – investing conservatively near the bottom of the market and aggressively near the top.
We see this everywhere today. The markets are extremely cheap and will not always be this cheap, yet investors are focused on fear of another decline or what might happen in Europe. Most investors are conservative today and focused on income investments, thinking they will be able to buy investments with more growth after the uncertainty clears up. When that happens, the markets will almost definitely already be much higher.
This video explains how to have the right mindset for investing and how to avoid the single most common investment error. It is the second in a video series.
You can find more detailed articles on this topic by reading:
This issue speaks directly to the difficulties most people have with investing. Even people not interested in finance need to understand this message.
The video is a bit small on this page, so hit the “full screen” button on the bottom right.
If you prefer, you can read the transcript here:
You have planned retirements for thousands of people. What you have learned?
The attitude you need to build wealth is: Think long term & have faith.
If you find it difficult to make smart financial decisions, it’s probably because you’re thinking short term. When you think long term, investment decisions can be easy.
One of the most common mistakes is to invest too conservatively to be able to have the retirement you want. Our experience is that most people need a decent return, like a long term average of 8% or more to have the retirement they want. This means you’ll need to invest in the stock market. To invest effectively in the stock market you need to think long term and have faith.
How do you deal with fear of losing your money?
We find that most people believe the stock market is far more risky than it actually is. Quite simply – They have a short term outlook. They focus on the short term ups and downs, not the long term growth.
You need to take a 20-year view, not a 1-year view.
We analyzed the S&P500 in-depth since 1871. The facts are: The stock market consistently rewards long term, patient investors.
- Fact: the worst 25-year period ever was a gain of 5% per year. Which means you will more than triple your money.
- Fact: the longest it has ever taken to recover your money is only 7 years not decades. This was right after 1929.
The key is having faith. When the markets are low, you need to be confident and see it as a buying opportunity. Long term, the stock market always goes up.
Question: With the investors I have talked with, whenever they invest, it seems to crash. Why is that?
The problem is that they don’t have faith. They only are confident enough to invest after the markets have been gone up for a few years. They only invest after they have been hearing & reading good news about the stock market from the media and their friends. But that’s usually near the end of the bull market. If you have faith all the time, then you see the buying opportunities.
Here is how you do it; let’s say that you went into the future with a time machine and learned one fact – 25 years from now, your investments will be worth 10 times what they are today. Until then – who knows?
But 25 years from now you will have 10 times as much money, as long as you stay invested. If you knew that, what would you do during a market crash? You would see it as a buying opportunity.
For example at the bottom of the market crash in March 2009, I published an article called “Irrational Pessimism”. If you sold then, you lost many years of growth. That’s the mistake you have to avoid. If you maintained faith or bought more, you’ve done very well.
What’s the message?
Faith gives you an optimistic outlook. Investors that have faith in the markets, tend to usually have good experiences. It is their outlook that is different. Because they always are confident that it will go up long term, down markets are not scary – they are buying opportunities.
Question: In short, what have our viewers learned about investing?
The key to building wealth and having the retirement that you want is to invest with a long term, optimistic outlook, and most importantly, to always have faith that it will go up over time.
The foregoing is for general information purposes only and is the opinion of the writer. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Opinions expressed are the personal opinion of Ed Rempel. Opinions expressed in this video are the opinions of Ed Rempel & not necessarily the opinion of Armstrong & Quaile
About the Author: Ed Rempel is a Certified Financial Planner (CFP) and Certified Management Accountant (CMA) who built his practice by providing his clients solid, comprehensive financial plans and personal coaching. If you would like to contact Ed, you can leave a comment in this post, or visit his website EdRempel.com. You can read his other articles here.