Since I’m less than three years removed from college, this is the first bear market that has affected my finances. I previously wrote that the one lesson I learned from this bear market is that I am not risk averse. I did some digging to further convince myself of this fact and to hopefully provide everybody with the information to determine their risk aversion. Here are a few facts and thoughts that I have stumbled across recently about long term investing.
From all of this information it is clear to me that the stock market is capable of producing below average returns for 20 year periods. Prior to 2000, the stock market returns were well above average. A reversion to the mean should not have been unexpected.
Why can I continue to not be risk averse after discovering that the stock market can provide 10 years of subpar returns? I choose to stay positive and take it as an opportunity to invest at a discount. If the returns stay subpar for the next 10-15 years, I will be investing at a discount for that period of time, fully aware that a reversion to the mean in the positive direction is just around the corner. I am looking forward to the upward reversion to the mean to carry my net worth and myself into an early retirement.
Ben Graham warns: “Long-term investors must be careful not to learn too much from recent experience.” I implore everybody to learn at least one lesson from recent experience and many lessons from your long-term past experience.
- Book Review: Common Sense On Mutual Funds
- Adjusting Cost Basis to Reduce Taxes
- Asset Allocation Series - Part 2 - Asset Classes
- End Of October Financial Status
- Biggest Lesson Learned from this Bear Market