Source: Unshakeable – TONY ROBBINS
As you and I both know, the stock market has made millions of people rich. Over the last 200 years, despite ups and downs, it’s been the best place for the long-term investor to build wealth. But you need to understand the market’s patterns. You need to understand its seasons.
What’s the biggest financial question on all of our minds today? In my experience, we’re all searching for answers to pretty much the same question: “Where should I put my money?”
As you know, humans have a tough time handling uncertainty. So how are we supposed to make intelligent decisions in this environment where everything seems uncertain? What can we do if we have no idea when the market will plunge – when the financial equivalent of winter will finally arrive?
But I’ve got news for you: we do know when winter will arrive. How? Because when we look back at the stock market over an entire century, we discover this extraordinary fact: financial winter comes, on average, every year.
We’ll begin by sharing some surprising Freedom Facts about corrections (i.e. When any market falls by at least 10% from its peak). Then we’ll turn our attention to bear markets (i.e. When a market falls by at least 20% from its peak). Finally, we’ll explain the most important fact of all: the biggest danger isn’t a correction or a bear market, it’s being out of the market.
Freedom fact 1: On average, corrections have occurred about once a year since 1900
Freedom fact 2: Less than 20% of all corrections turn into a bear market
Freedom fact 3: Nobody can predict consistently whether the market will rise or fall
Freedom fact 4: The stock market rises over time despite many short-term setbacks
Freedom fact 5: Historically, bear markets have happened every 3 – 5 years
Freedom fact 6: Bear markets become bull markets, and pessimism becomes optimism
Freedom fact 7: The greatest danger is being out of the market
As you can see in the chart below, the Schwab Center for Financial Research studied the impact of timing on the returns of 5 hypothetical investors who had $2,000 in cash to invest once a year for 20 years, starting in 1993.
The lesson? If you stay in the market long enough, compounding works its magic, and you end up with a healthy return – even if your timing was hopelessly unlucky. And you know what? The worst-performing investor wasn’t the unlucky one, but the one who stayed on the bench, the one in cash: he ended up with only $51,291.
The message is clear: the greatest danger to your financial health isn’t a market crash; it’s being out of the market. In fact, one of the most fundamental rules for achieving long-term financial success is that you need to get in the market and stay in it, so you can capture all of its gains. Jack Bogle puts it perfectly: “Don’t do something – just stand there!”
We make a living by what we get (donation)
When you give (money), you are abundance =)