3 myths of the stock market

Are you waiting to invest because you don’t trust the stock market? Maybe you feel the market is too expensive or the wrong political party is in office? When it comes to investing, studies show that your emotions can prevent you from achieving your goals.

During my time in real estate and as a financial planner, clients have brought up a myriad of different reasons they don’t feel comfortable. Here are the three most common.

“The stock market is a casino” = FALSE

The belief that the stock market is a casino couldn’t be further from the truth. The odds of winning at the casino go down exponentially the longer you sit at the table. In the stock market, your odds go up the longer you are invested. Unless you need the money in the next two years, investing the funds over the long term is a good bet.

“I’ll wait for the market to pull back” = HIGH RISK

Nobody knows when the market is going to pull back or speed up, there are too many factors in play. Timing the market requires you to be right twice, once when you decide to sell and once when you choose to re-invest. If you miss the returns of the best days in the market while you aren’t invested, you will kill your return.

During the 20 years below, there were 5,040 trading days. Missing the best ten cuts the return in half! What’s worse? The best trading days come in clusters around the worst days, making it extremely difficult to time entries and exits. The best strategy is to stay invested.

“I don’t trust what is happening in Washington DC” = IRRELEVANT

When it comes to investing, you far better off leaving politics out of it. If you were to invest based on party affiliation in the Dow, you would have left a lot of earnings on the table versus staying invested the whole time. Also, the market tends to do better when we have a divided government. Policy changes can affect the market movements, but it’s best to stay invested no matter who is in office.