The Truth About Investing and How to Fearlessly Self-Manage Your Money

You have a 95% chance of making money in the market (without a financial babysitter) if you do two things right.

Photo by Mateus Campos Felipe on Unsplash

Deep in the uncharted wilderness, you hear the sharp snap of a branch. Your heart races and you crouch, senses on high alert for a mountain lion attack.

Dozing on the plane, you shock awake to a powerful jolt and the engines scream. Your chest thumps like a bass drum as you brace for a fiery impact.

The stock market plummets in an unstoppable crash, leaving you destitute, struggling to survive on rice and water in a ramshackle tenement.

Three terrifying events. Three visceral fears. All end in irrational outcomes that you logically know aren’t going to happen. Yet they feel real and inescapable.

Fear is a powerful emotion that drives the fight or flight reflex. Sometimes it’s reasonable and sometimes absurd. But when it comes to investing your money, you need a rational approach — not one that’s based on fear.

The truth about stock market returns

S&P 500 annual returns swing wildly from 53% gains to 37% losses — an astonishing range of 90 points. As a result, short-term investing is a dangerous proposition if you don’t know what you’re doing (few people do).

Longer-term investing, however, fares much better. If we look at various hold-times, we see that the longer you leave your money invested and untouched, the more predictable and stable your returns will be.

20-year hold-times reduce the range of outcomes to a slim 13 points, and every 20-year period in history has been positive — with a nice inflation-adjusted return of 6.7%.

5- and 10-year hold-times are good too, with moderate to low variability and excellent returns.

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10-year analysis

Since 1926, the market has had 87 rolling ten-year periods. The chart below shows that in 84% of those…