Ups and downs of the stock market

March 11, 2022

I have been asked about the inevitable ups and downs of the stock market. So as a lawyer, who you would reasonably think after 40 years of practice I would have some understanding of the stock market. However, that is NOT the case. There is much I don’t get.

But here are a few things I think I understand.

Anyone who watches the daily or even weekly ups and downs of the market and “invests” on that basis will lose in the long run.
To maximize your return for the later years (I am over 70 now but believed this even when I was 35) one should invest at least a substantial portion of their “savings” in the stock market.
“SAFE SAVINGS” AND LOSING MONEY- To those who put their savings under their bed or in a nice, safe, FDIC protected bank account because they don’t want to “lose “money so they “don’t have to worry”, I say in the long run you will probably lose purchasing power- which to me is the same as losing money.
I was an economics major in college but didn’t get most of it- too complicated for me. What I did get is that if I put $100 in a savings account 15 years ago, that money will purchase less today with interest than it did then. I call that losing money.
The other part of saving I get is compounding. Essentially, that means you make money on the money earned on that $1 saved. It is amazing how compounding makes your investment grow, and the stock market is the best place for that to work.
An example, my wife and I early on made 2 investments. On the advice of an “expert” we invested some savings in a tax-free fixed rate return, which didn’t compound.
About 10 years later we had saved about half of that amount and put it into a specific stock. Both investments were tax free because the stock didn’t pay a dividend.
We did nothing with either investment for 40 years. The older investment was worth twice what we invested over 40 years; and the stock was worth eighty times the original investment!!
Do the math!!! If we had put the first investment in the stock, my wife could buy that boat her second husband may want!!
The second investment serves as the basis for our retirement. (I am not retired yet, she says “just keep working!”)