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“Stocks always go down faster than they go up, but they always go up more than they go down.”
Today’s thought — too long for a gravestone? — is one of my epitaph prospects.
It starts: “Stocks always go down faster than they go up…”
Whether in a day (October 19, 1987) or a month (the Covid crash of March 2020), market drops happen fast. With our instincts toward loss avoidance, we tend to panic out of things.
By contrast, bullishness — or, the persistent willingness of lots of people to propel a stock upward — isn’t triggered by single events. We need evidence to build over time. And so stocks go down faster than they go up.
But then there’s the second part, “… they always go up more than they go down.” Look at any graph of the American or global markets over time and the line runs lower left to upper right. The longer your view, the bigger the mountain.
That is the stock market’s truth… not over the last year perhaps, or the next, or some era cherrypicked by a market bear. That is the market’s truth over the period that matters: the long term. Your lifetime.
Yes, stocks go down! The average bear market, studies show, lasts about 18 months… usually a very un-fun 18 months. But two years in three, the market rises (… one year in three, it declines). You do the math… and play it forward! That’s why the average bull market lasts for years.
F. Scott Fitzgerald wrote, “If you can keep two opposed truths in your mind at the same time, that’s genius.” Today’s food for thought, bolded at top, asks each of us with Fitzgerald to show some genius.
The best way most of us are going to make the most money in our lives is to invest in the stock market, leave it in the market, and add more as we save going forward. That’s just as true today as 50 or 100 years ago.
Stocks always go down faster than they go up, but they always go up more than they go down.