Why are we telling you all of this? We’re telling you this because it’s important to understand that the market works in cycles. It will constantly go up and down, up and down. Once you know and understand the market you can stop fearing it and start using it to your advantage. The one truth is that in the long term, productivity will go up so over the long term so will the stock market. This graph is on a roughly 100-year scale. It’s easy to understand all zoomed out but when you’re in the thick of it, it’s hard to see where you are in the cycle. Don’t worry, all you need to do is hold on the long-term and you will do just fine. Now, that’s a lot of information and we didn’t even mention The Average Investor and what that means. The Average Investor The Average Investor is someone like me or you who don’t try and time the market – buy low and sell high. What’s the point? It’s going up over the long term and who has time to obsessively check stock prices? Not only does The Average Investor not try and time the market but they also don’t try to beat the market. They just try and achieve average returns. Luckily for The Average Investor, the market average is conservatively at 7% (10% on the high end). To see what that means just refer to the first graph in this article. It says that if you invest a certain amount of money for 30 years, at the end of the term you should expect it to be more than 7 times larger than your initial investment. Translation: Average is pretty damn good. Basically, being an Average Investor is a great financial goal because it doesn’t involve a lot of work or stress and locks in a nice healthy return over the long term. What more could you ask for? We called this section The Triumph of the Average Investor because the majority of the big market winners, in the end, are playing the same long-term investment strategy (including our hero, Warren Buffet). Why gamble all of your money in Wall Street’s casino when the financial goal is to grow your money, not lose it all?
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