3 times in the last few weeks I felt like a podcast was speaking directly to me. I don’t remember the quotes exactly, but it was along the lines of “A lot of these Millennials preaching index fund investing and “long-term” investing have only invested in a bull market, we will see what they are made of when a bear market slashes 40% of their net worth in a matter of months”
100% Mrs. AE and I.
I just went back and checked and my first big boy investment was in June of 2011. Let’s take a look at the S&P 500 chart since then:
With Dividends re-invested, that is a 112.922% gain in about 6 years. That makes investing easy. It also makes preaching about investing easy. I am not one to BS about my experience – I haven’t invested through a serious correction or recession. But when the time comes, I WILL stick to my guns.
This All Depends on Sticking to the Plan
Everything we are working towards is dependent on us sticking to the plan. Everything I outlined last week, “How much do we need” and “How long will it take” is dependent on us not getting scared out the market when shit hits the fan.
It would be easy to blow off the commentary as BS and slap a “that won’t be us” label on the advice/experience of the people making these comments. But they are people we should be listening to, they have lived through multiple corrections and held on to their shorts.
This post is just as much for me as it is anyone reading it. It will be where I go back to when my Net Worth chart stops going up and to the right.
I am fond of that chart and will not enjoy it getting ruined. But that isn’t in my control, so we need to prepare for its (temporary) demise.
Don’t be a punk and sell at the bottom, Remember these 5 things
This is for future you, but hopefully, a few other people can use this motivation to be a badass when the market dives. Sometimes it’s about tricking yourself out of a terrible decision.
Dollar Cost Averaging
First, a dose of math:
I realize this chart is not really intuitive, but it is a pretty sweet example of Dollar Cost Averaging working its magic.
You buy your first 40 shares at $25, the market dips and when the share price is at $17 you buy 58 shares (investing a regular interval). By the time the share price comes back up to $21, or $4 below your first purchase price, you are still profitable. Invested $10,000 and your shares are worth $10,382.
When the market goes back to its previous high of $25, your shares are worth $12,359.5. That dip rewarded you in a huge way.
What Goes Down, Must go Up
Newton’s Third Law be Damned, the stock market shuns gravity.
Look at the graph a few paragraphs above this one.
Now look at this one:
Ain’t nothing pulling this cliff down to earth. How can you not get excited to keep going after seeing this chart? That is steep!
Practice what you Preach
If I did a control find on this site for “Long-Term”, “Buy and Hold” or “Panic Selling” I would get at least one result per post. I LOVE the fact that if I panic sold people would shun me straight out of the internet. I would be branded an ultimate flip flopper.
The masses get scared and sell at the bottom!
FI is all about bucking norms and living your life a different way than the masses. I cringe when I read the negativity when a FIRE blog is featured on a main stream media outlet (CNN, AOL, etc). The excuses and comments that come flying out motivate me more.
You can’t do this with kids………….Lies
You must have gotten an inheritance………..I wish, but no
Both of them probably make 6 Figures……………Again, I wish. But No
I love proving people wrong, and if the experts think everyone will panic and sell at the bottom due to the lack of experience. I want them to be wrong. I have been doing my Financial Sit Ups lately, my stomach is strong (not
many any normal sit-ups, however). We got this.
You WON’T Hit Your Goals Without Investing
Most importantly, without investment returns, this whole FI thing becomes a pipe dream and you will be sitting at your desk for an extra 14 years saving $42,000 a year. That would be 26 years from today.
Actually, inflation would poo-poo all over that and you might retire in your early 60s………30 years…….
That is how long I have been on this planet and to date, I have enjoyed more of those years than I haven’t. And I would like to keep it that way.
Have you invested through a recession? Anything you can recommend for us Millennials that haven’t?