When Carl Richards with Behaviorgap.com, showed me his slideshow below, I loved it.
During the last 80 years, the stock market averaged a 10% return, but average is not normal. Do you think and act in terms of average?
Tons of people have withdrawn all their money from the stock market because….well, they don’t really know why — it just feels “bad” to keep it in. Logically, we all understand that the stock market’s average return of about 8% is an average — meaning it goes up and down — but when our 401(k) drops 40%, we want to get out immediately.
Too many people make gut-wrenchingly bad decisions because of fear and the irrational belief that they can predict the near-term moves of the stock market. In the short term, anything can happen. By having a longer time horizon, you can mitigate risk and almost certainly predict considerable investment returns. BUT YOU CAN’T TIME THE MARKET, ESPECIALLY IN THE SHORT TERM. FOCUS ON THE LONG TERM!!! IT’LL KILL YOU!!!