“2020 Is a dumpster fire!”
“2020 Is a dumpster fire!”
“2020 is a dumpster fire!”
So, 2020 is definitely the year for the books, if the book was The Da Vinci Code, a novel once described as “so bad that it gives bad novels a bad name.” If you are a fan of the novel I apologize (no, I don’t).
2020, like the novel, has had its own clumsy twists and turns that have left many of us reeling. 2020 brought in a new millennial and with that came a red-hot job market, record-low unemployment rate, and the stock market was at an all-time high. We were riding a high and I was daydream about my May trip to Israel (RIP), but like all good things……insert cliché here.
The stock market went from an all-time high on February 12th to the largest one week drop since 2008. Things only got worse from then as the stock market dropped, then dropped again and then continued to drop some more due to COVID-19, the oil price wars between Russia and Saudi Arabia, etc.
A recession seemed like the most likely of outcomes, the unemployment rate is at near 13% and many cities and states are just now easing social distancing policies. With all this uncertainty in the social, economic, and business world I completely understand why one would be hesitant to invest in the stock market.
However, you have two things that are working in your favor.
- The United States Government: Yes, yes, I know, I know. But the United States is for now the largest and most powerful economic system in the world. The economy will eventually recover, the stock will rise (and currently is near all-time high), the United States economic system will not fail (if it does, then we have bigger problems).
- Time: If you are the target audience of these blogs/posts/websites then you are probably a GenZ-er, (we need a better name), young millennials, or just overall cool person. When it comes to investing, father time is our greatest ally. The stock market will always have its up and down, trying to time the market is quite frankly a waste of one’s time. It is better to invest and forget (another cliché, but for good reasons,), the stock market average return will be about 6% to 7% when taking into account inflation.
There are other factors that are working in your favors but these are the two that I saw as being the most influential. So, even though 2020 is a hot mess now is the perfect time to start investing if you have not started yet. Waiting costs you time, and time is money when it comes to investing.
Tips when Investing in the Stock Market:
- Buy and Hold: The average return I showed earlier is only available to those who buy and hold. If you want to make quick money, trade frequently, or take out the money in less than five years you are going to end up earning very little if anything when commissions and taxes are factored in.
- There are always exceptions to this. If you are an experienced trader, stockbroker, investment guru then buying and holding may not be something that you want to do. There are several other investment options that are out there. But I am sure you already know that.
- Buy Low, and hold: You have probably heard of buying low and selling high, but I am a bigger fan of buying low and holding unto it for a long period of time. When the market is low buy and holds it as long as you can (unless you are into short term trading which comes with more risks/costs.)
- The common tandem is to buy low and sell high. But it can oftentimes be hard to time the market. If you have that kind of power then you should not be on this website, and instead should be chilling in the Maldives somewhere pulling in millions of dollars.
At the end of the day trying to time the market is a gamble. It is always hard to know when the perfect time is to jump in. But it is almost never the perfect time and it is always better to continuously and consistently invest in the market. Over time buying into the high and lows will eventually average out and you will gain in the long run and in a long run, I do mean very, very long, like 20+ years, 30+ years long. Just because 2020 is a dumpster fire does not mean you should not invest.
If I’ve convinced you great! Here is a link to get you started with a Roth IRA.
If you are not sold: This here is for you.