The Roller Coaster of Investment: A Journey Through Time
I want you to imagine for a moment that you started investing back in 1985. It’s hard to imagine, right? That was nearly 40 years ago. The world was very different back then — no internet, no social media, no smartphones. But you had a vision for your future, and you believed in the power of the markets.
So, you made the decision to invest. For a couple of years, things went exactly as you hoped. Your money kept growing, and the market appeared to be on an endless upward trajectory. You watched your portfolio slowly climb, with each passing month bringing more excitement, more confidence, more certainty that you had made the right choice.
Until one day...
The Monday Massacre: A Wake-Up Call
It’s October 19, 1987. You wake up to a shock — the stock market is crashing. Black Monday — they call it. The single biggest one-day market drop in history. The Dow Jones Industrial Average falls a staggering 22.6%.
Everything you’ve worked for seems to evaporate in an instant. Your friends, who until now thought you were some kind of genius, are scrambling. They’re calling you, sending messages, urging you to sell everything before it’s too late, before the market falls off a cliff.
But you’re not a novice. You’re a seasoned investor. You know the market moves in cycles, and you’ve heard this kind of panic before. You ignore their frantic advice and hold on.
You wait. Slowly but surely, the market begins to recover. The losses aren’t permanent. Over the following years, your portfolio bounces back, and life goes on.
But then... another storm.
The Dot-Com Bubble: The Rise and Fall of Technology
Fast forward to the late 1990s. The internet is changing everything, and the stock market is starting to feel the heat of this revolution. Technology companies, particularly those involved with the internet, are soaring in value. The NASDAQ is climbing, hitting new records.
But then the crash happens again. The dot-com bubble bursts, and the NASDAQ falls nearly 10% in a single day. The excitement fades into fear.
Your friends, once again, are panicking. They say, "It’s over. Time to cash out. Before you lose everything. Take your profits now!"
They don’t understand. They think technology is just a fad, something that’s come and gone. But you hold strong. You keep your faith in the future.
Once again, the market recovers. It’s not quick, but it’s real. Over time, the tech companies you had faith in start to dominate, and the market begins to rise. You were right. You didn’t listen to the naysayers.
Until… the next blow.
The Global Financial Crisis: A Catastrophe Like No Other
The year is 2008, and the world is on the brink of disaster. Financial institutions are failing, credit is drying up, and economies around the globe are spiraling into recession. The global economy contracts by a staggering 3% — the worst downturn since the Great Depression.
It’s the moment that people say is the end. The end of the stock market. The end of everything. People are jumping off buildings, markets are crashing, and millions of people lose their jobs and homes.
Your friends, once again, are screaming at you to pull your money out. "It’s too risky," they say. "You’re going to lose it all."
But, as you’ve learned time and time again, this is the nature of investing. The market goes up, the market goes down, but if you’re in it for the long haul, you don’t panic. You don’t act out of fear.
The market recovers, and it does so in grand fashion. By the end of 2009, the stock market has soared by 27% from its lowest point. Records are broken, and those who had the courage to stay invested have reaped massive rewards.
The Journey of a Lifetime: How a Simple Decision Can Change Everything
What’s the moral of this story?
Well, let me take you back to where it all began — 1985. That’s when I started investing, when I turned 18 years old. The market has gone through boom and bust cycles, and yet, every time I stayed the course. I didn’t let the market’s ups and downs sway me from my strategy.
Let’s take a look at the numbers. Over this time period, the average annual return was 11.23%. If I had invested just $250 a month from 1985 until today, I would have turned that $250 into $1,841,521.08. That’s a return of over 6000%.
But here’s the kicker. Between us, I invested a lot more than $250 per month.
This is the power of long-term investing. The power of patience. The power of making wise decisions, even when everyone else is panicking.
You see, investing isn’t a get-rich-quick scheme. It’s not about chasing the next hot stock or hoping to strike it rich with some lucky bet. It’s about time in the market. It’s about consistently putting money away, year after year, no matter what happens in the short term. It’s about having a strategy and sticking with it through thick and thin.
But, of course, this isn’t something most people understand. Most people talk about investing, but they don’t show you how to actually do it. So, let me walk you through the steps.
The First Step: Setting Up Your Investment Account
When I first started investing, I had to call up a stockbroker every time I wanted to buy or sell a stock. It wasn’t exactly the most convenient setup. But today, we have the luxury of being able to invest at the touch of a button, on our phones, no less.
The first step is setting up your account. There are many different platforms to choose from, and there are different types of accounts. But here’s a quick tip: you want to set up a tax-advantaged account. These accounts allow you to invest without paying unnecessary taxes on your profits.
For example, in the UK, you can open a Stocks and Shares ISA, which allows you to invest up to £20,000 a year tax-free. In the US, you have Roth IRAs, which are great but come with a lower annual contribution limit.
Once you’ve chosen a platform, it’s time to deposit money and start investing. I’m going to show you how to do it on an app called Trading 212.
The Magic of Index Funds: Why I Invest in Everything
If you want to start investing, my best advice is to make it simple. Don't try to pick individual stocks at first. Instead, consider index funds.
An index fund is a collection of stocks that tracks the performance of a particular index. For example, the S&P 500 tracks the 500 largest companies in the US. When you invest in an index fund, you’re not just investing in one company; you’re investing in all 500 of them. This diversification helps spread risk and gives you exposure to the entire market.
Just like the music charts, where the most popular songs climb to the top and the less popular ones fall off, an index fund automatically adjusts. If a company in the index starts to perform poorly, it’s replaced by a better performer. This means you’re always investing in the winners without having to pick them yourself.
Automating Your Investments: The Secret to Long-Term Success
One of the best ways to ensure success is to automate your investments. I’ve set up my son’s account to invest £5 a day into the S&P 500 index. This is a little over the cost of a Starbucks coffee, but it adds up over time. In just three months, his account has grown by 5.03%.
Automation ensures that you stay consistent. You don’t have to worry about timing the market or trying to predict which stock will go up or down. You just set it, forget it, and let your money work for you.
The Power of Compounding
Here’s the real secret to long-term investing: compounding. When you invest, you earn returns not only on your initial investment but also on the returns you’ve already earned. It’s like a snowball effect. The longer you stay invested, the more powerful it becomes.
For example, if you invested £250 per month into an index fund for 31 years, at an average return of 8%, your total investment would grow to £1.14 million. That’s just by investing a modest amount each month.
And if you kept going for 40 years, your portfolio could grow to £3.56 million.
This is the power of patience and compounding.
Starting Young: The Key to Building Wealth
The biggest takeaway I want you to get from this is the importance of starting early. If you start investing at age 25 and continue for 30 years, your portfolio will be worth a lot more than if you wait until you’re 35 or 45. The earlier you start, the more time your money has to grow.
And remember, the market will go up and down. But if you diversify and stick to your long-term strategy, you’ll be able to weather the storm, just like I did.
Investing is a journey. It’s a roller coaster, full of thrills and chills, but if you stay the course, you’ll come out the other side with the wealth you’ve always dreamed of.
Source: youtube