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Last week, I was invited to speak on a business radio show. While I waited to be interviewed, I could see the three hosts through a large, glass window. They aired the business news. They reported on the price of gold and oil. They talked about bitcoin. They spoke about different currencies and how they were expected to jump around. They also talked about stock market levels. Such up-to-the-second news isn’t easy on the nerves. It felt like a casino without the bells and flashing lights.

After my interview, I spoke to one of the hosts. I’ll call this person, Lee. He wanted to invest in stocks. But the “experts” that Lee interviews say a market crash is coming. Unfortunately, such experts can’t predict market crashes. Many sound convincing. But there’s no shortage of experts calling for a catastrophe–every single week of every single year.

That’s why, for years, Lee has been putting money in his savings account. But it pays paltry interest. In January 2018, he had about $140,000. Every year, that money loses to inflation.

During the 10-year period ending December 31, 2017, U.S. inflation increased by a total of 18.31 percent. The interest on his savings account hasn’t kept pace, so Lee has been losing money (in terms of buying power).

This might sound familiar. Perhaps you’ve gained an inheritance, or, like Lee, you’ve been stockpiling cash in a savings account or mattress. Instead, you should invest that money now.

I know you might be scared. But there’s far more to lose if you don’t invest. You might miss the best trading days of the decade. You won’t see them coming. Nobody else will either. For example, a $10,000 investment in the S&P 500 in 1994 would have grown to $58,352. However, if you had pulled your money out, you might have missed the five best trading days. In that case, the same $10,000 would have grown to just $38,710. If you had missed the ten best trading days, it would have grown to just $19,121.

The Problem With Market Timing: Missing The Best Days
1994 - 2014

$10,000 Invested in the S&P 500 S&P 500 Annualized Return Value of $10,000 at the end of the period Gain/Loss Impact of Missing Days
All 5,037 trading days 9.22% $58,352 $48,352 No negative impact
Less the 5 days with the biggest gains 7.0% $38,710 $28,710 -40.62%
Less the 10 days with the biggest gains 5.49% $29,121 $19,121 -60.45%
Less the 20 days with the biggest gains 3.02% $18,146 $8,146 -83.15%
Less the 40 days with the biggest gains -1.02% $8,149 $-1,851 -103.83%

We would all love to have a working crystal ball. We could successfully time the market. But no such thing exists. That’s why it’s best to stay invested.

Lee, however, is afraid. He has $140,000, but he’s reluctant to invest. Lee wants to wait. Unfortunately, he has waited long enough, and it has already cost him plenty.

Lee plans to work for 15 more years. When he retires, he could sell an inflation- adjusted 4 percent per year. If he did so, he shouldn’t run out of money, no matter how the stock and bond markets perform during any single, calendar year.

But what would happen if he decided to invest a large lump sum today and the markets crashed tomorrow? History provides a clue. In 2008, U.S. stocks dropped almost 38 percent. International stocks fell more than 44 percent.

Let’s assume Lee had invested $100,000 in a portfolio of low-cost index funds at one of history’s worst possible moments: January 2008. Here’s how it might have looked:

  • 30% U.S. stocks
  • 30% International stocks
  • 40% Intermediate-term U.S. bonds

If he didn’t add another penny, and he rebalanced once a year, his $100,000 investment would have grown to $170,255 by January 31, 2018. He would have earned a compound annual return of 5.47 percent. Lee’s savings account hasn’t kept pace with that. He would have done even better if he had kept adding money to his initial lump sum.

Lee currently puts $1,500 a month in a savings account. If he had added this to his investments, his money would have grown to $433,926 by January 31, 2017. This would have been a compound annual return of 6.37 percent.

It can be frightening to see our portfolios fall after a market crash. But we shouldn’t be concerned about daily, monthly, or annual returns. Instead, we need to consider the purpose of our money. Most people invest to provide money over the duration of their retirement. This could be 30 years or longer. As I’ve written before, even those who retire on the eve of a market crash end up doing just fine–if they keep level heads.

Psychologically, investing can be tough. It’s even tougher for those who report investment news. Up-to-the-moment newscasts are like fingernails on a chalkboard. Unfortunately, those who report the business news might suffer most of all.

Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas