If investing were easy, everyone would make lots of money all the time. Sadly, investing isn’t easy. But history is very clear: the hardest part isn’t actually picking stocks; it is controlling your own emotions. Instead of jumping in and out of the market, as far too many investors do, you should create a long-term plan and stick to it through thick and thin. Indeed, there is a bear market coming, though nobody knows when, and this one single investment move will still help you build life-changing wealth even when the bear eventually arrives.
Mercurial investors are hard to deal with
Wall Street moves from one hot investing topic to another like a grasshopper. It is mind-boggling at times how quickly an investment theme can gain traction and fall out of fashion. One of the best examples is the dot-com bubble that rose and burst at the turn of the century. It’s extra important today because there’s another technology bubble inflating right now with artificial intelligence (AI).
Missed AI’s “Act 1”? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
If history is any guide, AI spending will outpace the benefits the technology offers. Then investors will flee AI stocks for safer shores, even as the technology, as expected, changes the world. If you were around for the dot-com bubble, you know that the up feels great and the down can be brutal and linger for an incredibly long time. But take a look at the chart below, which starts just before the dot-com bubble finally burst.
Notice that, roughly a quarter of a century later, the dot-com bear market looks like a tiny blip. The same can be said of the Great Recession, when investors were legitimately concerned that the global financial system would fail. This isn’t some odd period in the market. If you go back even further, what felt like deep downturns at the time look like non-events today.
If you just buy the market, using an S&P 500 index (SNPINDEX: ^GSPC) tracker such as Vanguard S&P 500 ETF (NYSEMKT: VOO) or SPDR S&P 500 Trust (NYSEMKT: SPY), you’ll likely build material wealth over the long term. The S&P 500 is meant to track the U.S. economy, making it a good option for those looking to keep their investment lives simple. And, if history is any guide, you’ll likely build wealth over the long term even if you start buying right before a bear market, so there’s no reason to wait.
