You may have heard “the stock market is like a roller coaster.”
We hear it all the time, but the problem is, it’s a terrible analogy.
Roller coasters always start and stop at the same spot. They start by climbing a big hill at the start, and it’s all down-hill from there. Before the ride ends, there may be a few up and downs, but generally you can see what is coming and the ride does not change if you go again.
Like a roller coaster, the market does go up and down. In every other way, including the characteristics of the ups and downs, the market is completely different.
During bull markets, we climb the “wall of worry” as investors continue to enter the market. Eventually the market hits new highs and with the new highs come investors looking to make “easy money.”
The end of a bull market, by definition, comes at a high point, not the low point in which it started. Additionally, each bull market is different; it follows a unique path. The beginning and end of a bull market is determined only after it becomes historical data.
Studies show that most investors get into the markets after they’ve steadily climbed out of a recent bottom, with the biggest inflows coming very close to the market peaks. The same studies show that the opposite happens at the market lows.
In other words, most investors buy high and sell low.
Maybe that’s why they call it a roller coaster ride, although it sounds more like a water slide. They get off at the lows!
One last thought.
When you climb into the coaster car, there’s an entry-level employee, often a distracted teen-ager, with probably a couple hours of training, making sure that you are going to be safe while you’re on the ride. If you follow the instructions, you’ll probably survive.
At Enduring Wealth Advisors® we’re experienced and educated, passionate and compassionate. We can help you understand how much volatility you may experience to pursue your financial goals.
Reach out to us today with any questions you have about how your plans are tracking.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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