First of all stop getting scared when the market goes down. So many stupid people sell when they see a down day. Big deal if the market goes down. Keep your money there and continue buying. I have been in the market since 1987....June of 1987....guess what happened in October......yowsa....quite an experience. I am glad it happened because it taught me to just keep it there and continue sending money every money. Have done this since then and have never taken a penny out of the market no matter how badly the market gets. I know that in 25 years, I will probably have to start thinking about taking out some during retirement but I will worry about that then. Everyone should be investing SOMETHING if they want any decent retirement. But the biggest thing is stop trying to beat the system....you can’t.
I agree with your sentiments in large part. I did get scared out of the market almost 2 yrs ago though, not because it was going down but because it was continually in “record territory” with nothing real to support it. Currently I’m almost entirely in bonds and waiting for the crash to buy back in. My only regret is that I sold as early as I did; should have run it up another year.
However, the constant refrain of “record territory” kept giving me a Warren Buffet line in my head: “When people are greedy be fearful, when people are fearful be greedy.” After a month of this I had to sell.
I think you’re right. We got scared in 2008-2009 and got out of the market, and stopped contributing to retirement savings for a while. Looking back, I think that was a big mistake. Had we stayed in and kept buying, we’d be way ahead. It’s hard to play “catch up” later.
As a lot of people learned with Enron or Bear Sterns, don’t put all your 401K contributions in company stock. If you get company stock matching, as my employer once did as the 401K match, sell it as soon as you are able.
Could not agree with you more. I've been in the market since 1982 and in the 33 years since, I've only actually sold stocks once. That was a few years ago when I sold some Apple stock to fix up my house - and I'm kicking myself for even doing that. Should have done that with an equity line. Other than that, I've socked 15-20% of my income into 401(k) and stocks over three decades and forgot about it. I encourage having that money transfer out of your check through direct deposit, that way you never really have it in hand and so you don't miss it as much (kind of like having taxes taken out).
The main advantage of long-term investing is "dollar-cost" averaging. When you are long-term investing, you actually want the market to go up and down. During down times, you are purchasing stocks at a lower rate and then riding them back up again. Because you are never selling, you never actually realize any losses when the market does have a downturn.
During this entire time, I've had to deal with "Chicken Littles" telling me I was a fool to be in the market and that it was about to crash and leave me penniless and that I would then get my "comeuppance." It seems that many people out there are very concerned about me getting a "comeuppance." I attribute that to envy.
Anyway, it's never too late to start saving for retirement. The magic number is your age times your salary divided by 10. This is what your net worth (not including home equity) should be at a given age.
So if you are 50 years old making $200,000 a year, you should have a net worth of $1,000,000.
If you are 30 years old and making $60,000 a year, you should plan to have a net worth of $180,000 by that time.
Now some people like to include home equity in their net worth. I was never a fan of that because you are always going to need a place to live. For example, I have have $800,000 equity in my home but if I sell it, I'll be homeless and will have to buy another house. Now if I then buy a $400,000 house cash, then I can add that other $400,000 to my net worth.