Last update: 17.09.2024 08:34
In his book “Stocks for Eternity”, J. Siegel writes that nothing is as profitable as investing your money in stocks. Because in the long term, you can only win… And a lot. But how?
Betting against the stock market is not worthwhile. And it’s certainly not worth keeping your hands off it altogether. Nevertheless, many investors shy away from it because they are afraid of the risk. However, Siegel reports on Stable and secure returns on the stock market for 200 years – Specifically, an average annual return of 6.6 percent between 1802 and 2012. The following example is also impressive: one dollar from our great-great-great-grandparents would have grown into a fortune of over 700,000 dollars on the stock market over this period.
So we could gain a lot. But we could also lose a lot, as we experienced not too long ago. The shock of 2008 still runs deep for some of us. After many years of rising prosperity and unbroken confidence, everything suddenly went wrong. And the money was gone. Irretrievably. Unrecoverable. Or could it? Let’s take a closer look at Siegel’s arguments.
According to Siegel, it took investors around 5.6 years to recover from the 2008 financial crisis. You have to allow for a certain amount of time, because shares do carry a higher risk in the short term, In the long term, however, they are the more stable option compared to bonds. However, we must not be guided by emotions and opinions and make the biggest investor mistake: Buying at high prices when times are good and all investors are optimistic, and then selling at low prices when we no longer see a good end.
So how can we maneuver through the ups and downs of the stock market – without losing our upward trajectory? First of all start. And not later, but right away. There is no good or bad time. Because all knowledge about the stock market and its development is reflected in the current price. If the forecasts are bad, we buy at lower prices. If you have a long-term horizon in mind and only invest money that you can spare for a few years, then you can remain invested even if prices fall – you can ride out the downturn. You can diversify risk by selecting global ETFs with broad market coverage and investing regularly. You can find out everything you need to know about investing in ETFs in our eBook.
Finally, Siegel urges investors to remain realistic when investing in shares. With an annual return of 6.5 percent and reinvestment of dividends, assets double every 10 years. We should have a 10-year investment horizon, or even better 20 years, in mind for the portion of our assets that we invest in shares. In addition, it is essential to keep an eye on the costs. Here, index funds or ETFs are a favorable alternative to actively managed funds.
Mach den ersten Schritt zur finanziellen Unabhängigkeit
In einer Minute siehst du deine Vermögensentwicklung und dein Einkommen während der Rente.
