Did you notice that for the past couple of weeks, your stock plan has been nosediving?
The market has returned only negatives and not a single green week on week in the past couple of days. That can be scary – no, it’s frightening.
How can you invest $1,000 and check your investment three weeks later to see a balance of $870? 13% of the value of your money is gone! Times like this make you question your conviction and those managing the money for you. Before you do, though, let me take you down memory lane.
In the stock market history, dips (or call it drawdowns) are the norm, not the exception. They happen frequently. And it is only wise to prepare your mind that you will experience it at one time or the other. Any expectation that does not put drawdowns into consideration will soon meet a big disappointment.
The chart below shows the yearly historical returns of the S&P 500 spanning 30 years. As you will notice, the story of 30 years is never one of continued green bars. Rather, it is one of few greens followed by few reds, then green again, and the cycle continues.
But if that’s the nature of the market, why will anyone invest in a thing like that?
It’s because, despite the volatility in the stock market, it is still one of the best investment vehicles. Stocks have stood the test of time and created wealth for people across the globe.
Imagine a scenario where someone invested $10,000 in the S&P 500 in 1991 and left it invested until 2020. How much do you think the $10,000 will be worth?
$10,000 invested during the period will be worth $152,000 now. Despite all the ups and downs, the many stock market collapses, the investor still ends up with $152,000 in the end.
The stock market is not a get-rich-quick scheme, if you’ve been told otherwise, it’s time you reset your expectations. But the stock market can help you make untold wealth only if you are patient and stick to investing, rain or sunshine.
So don’t think you are doing anything wrong if your $1,000 turns to $870. You are not wrong, hold your conviction firm and know that there’s nothing to worry about.
About The Rise Stock Index
The Rise Stock Index comprises some of the finest companies in the world. They are innovating and building new products and services to make the world a better place. There’s a high likelihood that you use some of their products (Twitter, Amazon, etc.), and you can’t even imagine a world in which those products are not available to you. That’s what it means for the fundamentals of a stock to be intact despite a price decline.
What we invest in at Risevest are not fads or meme stocks like GameStop. Instead, we look for companies leading the market, innovating at scale, and designing business models that allow them to capture value at different value chains of their products. Although companies like these may also underperform in the short term, over the long term, they deliver excellent returns to our investors over the long term.
We have written about a few of these companies in our portfolio; Shopify, Bumble, and CrowdStrike. We will continue to write more about how we are thinking and what we are thinking about these portfolio companies to keep you informed.
In the meantime, focus on growing your career and business while we focus on growing your investments.
Also, if you are looking to make extra income, we are putting together a conversation on May 29, 2021, that will benefit you a great deal. Register here.