Over the past couple of weeks the stock market has returned to its volatility and has scared a lot of people. Personally, I have seen my own investments drop by over $12,000. Am I worried? Not really. For one, this kind of market upswing and is common. I don’t have a problem with risk in my investments and realize that it will go up and down depending on the day.
Second, I won’t need this money for years. I don’t plan on retiring anytime soon (I hope to reach financial independence by the end of my 40s). I am a traditional buy and hold investor. I buy something and tend to hold that investment for a very long time. Based upon the history of the market there is a really good chance that my money will be worth more in 10 years than it is today.
Third, we haven’t had a market correction in a while and market corrections are normal in any kind of stock market cycle. It has been over two years since we have a 10% correction and we are due for one. Moreover, in every single mid-term election since World War II we have seen some kind of stock market correction. This is just another bump in the road. It won’t spell the doom for the stark market. A market correction is healthy and it is an opportunity to buy the market on-sale.
Fourth, October is traditionally a horrible time for the stock market in general. It is one of the worst times of the year. We are approaching a mid-year election. There are global crises in Africa, Ukraine, and Iraq. Global growth is slowing. Europe looks like it is going into recession. Combine this cocktail altogether and it is no wonder why we are having market volatility. It is not unusual.
Fifth, I think that once that election is over we will have a traditional Santa Claus rally that often happens about three weeks before Christmas and we will get back some of the gains that have been lost.
Volatility is scary for any person, but even scarier is jumping in and out of investing like you are a jumping bean when things go down a bit. Even if we have another bear market I am staying in. I am in the for the long-term and the odds are pretty darn good that five years, ten years, twenty years, and so forth from now that I will have more money than what I started with. I may have lost some initial gains, but I know in the long-term it will work out. Don’t Be Scared! Stay in and buy the stock market on sale.