Originally published at: Why you don’t have to fear a stock market crash – Personal Finance Club
It’s unlikely any of us will ever turn $1,000 into $29 million, but that’s exactly what the stock market has done over the last 100 years. We of course don’t have a 100 year timeframe, but zooming out like this paints an important picture: the market goes up. All those “crashes” we hear about on the news are just small bumps on a long upward climb.
And while it would be nice to turn $1,000 into $29 million that’s not realistic on a shorter time frame. But a 10.8% annual return may be! And if you invest $500 per month into the stock market and get a 10.8% return, 40 years later you’ll have a cool $3.4 million! Not too shabby! Want more, or want it faster? Invest more per month! Want to gamble and get a higher rate of return? Well, that’s likely to leave you broke in 40 years. I’ll take the $3.4 million.
Note how small the COVID crash from last year looks. At the time that was a DRAMATIC stock market crash, with the market losing 35% of its value in just a few weeks. But, as every crash in history has, the market recovered and continued to break all time highs.
Of course none of this accounts for inflation, which erodes the spending power of the dollar, but with inflation generally comes higher wages and hopefully higher investment contributions to make your final amount even bigger and partially combat inflation.
Don’t get caught sitting on the sidelines as this wealth creation train continues to steam forward. Get started investing and get your share of the growth of the market!
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.