| *in slow motion as you look at your brokerage account* “Ohhhhhhh Noooooooo!!!!!” But should you really care? No. As long as you’re not withdrawing money, it doesn’t matter if the market tanks now or later. Let’s prove it with some numbers. In scenario A, the market tanks 10% first followed by a 20% rebound. And in Scenario B, it’s reversed. Scenario A: Initial Investment: $100,000 Market value after a 10% loss: $90,000 Market value after a 20% gain: $108,000 Scenario B: Initial Investment: $100,000 Market value after a 20% gain: $120,000 Market value after a 10% loss: $108,000 So don’t be scared about putting a lump sum to work because you think we’re headed for a cliff. Downturns WILL happen, but whether you get them now or later, it won’t impact your returns. (Unless your withdrawing money at the same time. That’s called Sequence of Returns Risk and that’s something to be avoided. But that’s a different topic for a different day.) Beeteedubs, this is also why we don’t believe in dollar cost averaging. It may FEEL safer investing a little bit at a time, but it won’t help unless the market is an extended downturn which rarely happens. |
