Can investing be stress-free? (Part 1)

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Yes! But there are some requirements:

Requirement 1: an understanding of the market.

Stress-free investing involves an understanding of the market. Not an understanding of what the market will do in the next 10 minutes, or next 10 days, or next 10 months, that would require psychic abilities which is unfortunately unrealistic, but a real understanding of how the market works and what you can and should expect from the market.

Two main points here:

  • The market is unpredictable. Prices already reflect all of the knowable information, the market moves based on future information. Since no one knows the future no one knows how the market will move in the future, despite what some financial professionals may have you believe. The misnomer that you or the professional you’re working with must have some insight into the future movements of the market is the cause of a lot of stress by itself. Thankfully, stress-free investing doesn’t require clairvoyance.
  • The market is volatile but it trends upward. The volatility makes the market feel dangerous. People generally believe that they could lose most or all of their money in a market downturn (talk about stressful!). But the truth is that markets trend upwards, and over long periods of time (10+ years) the market is always up, despite whatever crashes it may have endured (including the Great Depression and the 2008 housing crash). If you’re invested well (which we’ll get to in part 2), you don’t have to worry about the market destroying your savings! You just have to ride out the dips and enjoy the long-term, upward trend. The market is only dangerous if you try to bet and predict it, it becomes your friend when you focus on owning it.

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