At first, Courtney’s decision seemed wise. She sold at the beginning of the dotcom bust, down just 11%. The market continued to fall, bottoming out almost 50% down from its previous record high. Courtney felt she learned her lesson not to gamble in the market, and kept putting her money safely in a high-yield savings account.

Meanwhile, Chelsea understood that the market pays higher long term returns but those don’t come without the cost of shorter term volatility. Since Chelsea wasn’t planning to spend her money soon, she welcomed the cheaper prices when the market fell and was able to acquire more shares of her index fund for fewer dollars.

Today, Chelsea’s buy and hold strategy has paid off leaving her with more than three times as much money as Courtney! Since 2000, despite all of the crashes we hear about in the news, Chelsea has enjoyed an annualized return of over 11% compared to Courtney’s 3% in a savings account.

I often hear concern from new investors. “I started investing in December and I’m losing money!!! Should I pull out?!” Absolutely not. Investing is a long term game and it requires being willing to roll with short term volatility of the market. Talking heads on TV and social media will claim this or that is about to happen, but they’re all full of 💩. While we DO know the market is going to drop, we don’t know when and by how much. The bottom of the next crash might be HIGHER than today’s price. Don’t miss the huge run up worried about the eventual smaller fall. Don’t be a speculator. Be an investor. Buy and hold. Happy Halloween.

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.

-Jeremy