Being a long-term investor requires a lot of patience, and it also requires being aware that losing money is very possible. And when you lose money, there’s really nothing you can do about it. Over the past century, the stock market has been found to hit new highs on only 5% of all trading days. Bear markets, brutal market crashes, and recessions are inevitable and you will experience them as an investor.
The markets are unpredictable
On average, you can plan to lose at least 10% of your money once every 1-2 years. It is also advised to plan on losing 20% of your money once every 3 or 4 years, 30% once every 6 or 7 years and 40% or worse every 10-12 years.
Of course, these time frames aren’t set in stone as the market is unpredictable (I say “average” loosely). However, it’s always good to be prepared. Investing in the stock market long-term will certainly grow your money over time, but don’t be surprised if you lose money without warning once in a while too.
The same principles apply in almost any risk asset: Anyone who’s invested in cryptocurrencies can expect to see 20% losses within minutes, or 50% losses within days. People put aside money in the present so that they can have more money in the future. However sometimes in order to get to the long-term, you have to see your present holdings fall.
You’re going to be disappointed if you’re always expecting your investments to be high, because absolutely nothing that makes money in the long-term is up all the time in the short term. Sometimes, getting money long-term involves losing money in the short-term — it’s inevitable. It’s important to know this before starting investing so that you aren’t disappointed.