Stock Market Risk is Avoidable, If You Know the Game

The number one reason why people don’t invest in the stock market is because they claim to not know enough about it. If you are reading this post and are subscribed to the blog, that excuse is out the window. The next reason why people sit on the sidelines is because they claim the market is too risky. While I would be lying if I said investing is risk-free, I would also be lying if I said there wasn’t a proven investing method that eliminates stock market risk.

You’ve Come Across this Method Before

If you have even the slightest experience in the stock market, you are fully aware of what I am about to tell you. Investing in the S&P 500 over the past 40 years has yielded a 12% annual return on average. Depending on experience, 12% might seem like nothing, but to sustain a number like this for 40 years was an unbelievable thought for many years. Although, the S&P has done just this, providing its investors with incredibly strong companies such as Johnson and Johnson ($JNJ) and Proctor and Gamble ($PG). Yes, the enhanced reason to invest in the S&P is the diversification it provides and the returns it brings, but I am about to show you exactly why if you plan to invest long term, the S&P 500 should be where the bulk of your money is.

There’s No Risk!

Yes you read that right, there is no risk when you invest in the S&P 500. How can this be? There were surely years where the S&P 500 dropped, like in 2008!

Yes it did, it actually dropped an incredible 38%. But if you don’t sell your investments, you theoretically have not lost a dollar, your assets just lost some value. Since 2008, the S&P 500 has 4x in value, so it is safe to say those who held, have done just fine with stock market risk after losing 38%.

Stock Market Risk Eliminated

One financial analyst I recently had the great chance to speak with ran an analysis of the S&P 500 over the past 70 years. In this time, the S&P 500 has had 55 years with a positive return, and 15 with a negative return! Not 100%, but for any given year you invested, there was a solid chance you left in the green. The analysis gets juicier though, and this where you will want to put all your savings into S&P 500. If you look at the S&P 500 in 5 year periods, meaning 1980-1984 and 1981-1985, there are only 7 periods with a negative return! However I’ll do you one better. Looking at the S&P 500 in 20 year periods (there are 51 of these periods), there are 0 periods with a negative return, not one!

All the stock market risk people fear has to be thrown out of the window now, it is almost proven if you stick to the plan, returns are guaranteed. TJ has recently made a post detailing potential returns utilizing compound interest, and now you see exactly how trustworthy these returns can be!

Balance the Portfolio

I could not sleep at night if I tried to tell you guys for the rest of my life every dollar I invested would be going right into the S&P 500, even after proving the absence of risk. Finding that next Apple or Amazon is just too exciting for me, and seeing the 100% gains in 2 months is too electric. Investing with these purposes is much, much more risky, but can payout much more. Even still, putting aside money to invest in the S&P 500, and even hopefully adding into your position monthly should be apart of the plan as well. A great way to attack this is through a Roth IRA, and letting the money blossom until you are ready to take it out during retirement.

The key to all parts of investing is starting early, and the point of our blog posts is to help you understand this and to believe in the potential gains. Don’t be stranger, DM us on Instagram or Twitter, or leave a comment if you have any questions or just want to share your investing experiences!

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