Yes, You Can Control the Market

By James E. Wilson via

What if you could control the market? Well, you can control the stock market over the long term if you are willing to resist the siren songs of currency and certainty.

The first step in establishing control is understanding why you are investing. If you are 50 years old, the inflation rate has been 4.1% per year during your life. At that rate of increase, your living costs will double before you turn age 68. So, if you have $100,000 per year of living expenses today, this could be $200,000, (based on your lifetime inflation rate,) around the time you retire to maintain your current living standard. To add insult to injury, research shows that your inflation rate likely increases after retirement. Any way you look at it, keeping pace with inflation is the core reason most people invest.

Once you have the “why,” onto the next step. This step involves both faith and trust. One definition of faith is “believing in something without proof.” To control the market long term, you need to have faith in 90 years of market returns history. Despite all the “talking heads” on financial shows each day, no one can predict the future. There is no certainty about what will or won’t happen today. So, to achieve control, you have to let go and trust in the future. Sure, the future won’t exactly replicate the past, but decade of market data give us a reasonable roadmap for expectations from the stock market.

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