Slow and Steady Wins the Race!
Tip #1: DO Invest Consistently
As part of your monthly budget, plan to use some of your money every month (AFTER you have paid off all non-mortgage debt and built your emergency fund) to invest in the future of yourself and your family. One strategy I previously shared to simplify this process is to automate investing. Each month, I have an automatic match into my 401K, automatic transfers into a Roth IRA and 403B, and also manually deposit at least $150 into an S&P 500 Index Fund account. As I will highlight shortly, the market fluctuates, but many index and mutual funds (I avoid single stocks) have a track record of increasing over the years. A primary key to winning with YOUR money is by putting as much of it as possible to work.
On July 1 of 2022 I started a new page in my investment portfolio by opening an S&P 500 index account with $1,000, and have been contributing $150 each month since. If I continue this habit for the next 20 years at the S&P’s historical 10% interest rate, this account should swell to over $100,000.
Tip #2: DO Research and Learn Historical Trends
There are literally hundreds of index funds and mutual funds available to take advantage of and grow your retirement nest egg. I am not writing this article to sway you in one direction or another. I am hoping to show that there is never a “perfect” time to get in or out of the market. If we look at three famous market funds (S&P 500, Dow Jones Industrial, and Nasdaq Composite), we can see common trends over the past four years which included at least two significant economic events-the Covid-19 pandemic and an inflation fiasco.
Each fund has withstood these speedbumps to have made significant gains over the past four years. Over three-month intervals over this span, the market has had many more periods of gain than loss. Unless you sold low or bought at the peak, you have made money. Even if you bought into the market at its peak (September/December 2021), you can see that each fund hit a valley over the past six months yet is now once again trending upward. Historical data suggests that each fund will eventually hit a new high.
No matter which index or mutual fund(s) you prefer, if you have stayed the course over the past several years, chances are you are a very happy investor!
Tip #3: DO NOT Sell in a Panic
Throughout time there have been memorable issues in the economy that have caused momentary drops in the stock market such as Black Monday, the burst of the housing bubble, Covid-19, etc. Also, some companies have failed (the main reason to avoid single company stocks in favor of fund accounts). However, I have highlighted three famous market index funds that have consistently increased in value over the past four years, including recovery from famous “the world is ending” events to become even stronger.
Let’s pretend that someone panicked at the beginning of the Covid shutdown and sold their $100,000 worth of investment in the Nasdaq Composite fund on or around March 16, 2020. This investor would have missed out on their money being doubled to over $200,000 just 18 months later. Even though the value of the Nasdaq has decreased some since September/December of 2021, we can see that over a four-year period, this fund has increased by over 74 percent! Anyone who has stayed on the path of committing to a routine of investing has reaped the benefits.
The market goes up and down. Tracking your accounts every single day can be stressful and headache-forming. However, history tells us that established market funds will rise in the long run.
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