Time-Tested Financial Habits, part 4 of 5

From Motley Fool comes this —

4. Invest for the long term

There is no doubt that despite the ups and downs of the stock market, investing in stocks can be one of the best ways to build wealth over the long term. It can allow you to take advantage of compounding and have your money work for you.

Unlike short-term trading, long-term investors often don’t let emotions get in the way when short-term market volatility creates uncertainty. So instead of a never-ending cycle of buy high and sell low, long-term investors stay in the market and strive for benefits in the long run.

Data for a hypothetical $10,000 portfolio invested in the S&P 500 for 20 years—from 2003 through 2022—show the performance would drop from $64,844 (9.82% annualized return) if you stayed fully invested) to $29,708 (5.6%) if you missed the 10 best days, a whopping 54% lower return! If you missed the 30 best days, your return would drop to $11,701 (less than a 1% total gain).

The key is time invested in the market—not timing the market!

In addition to saving and investing, take advantage of the tax-deferred growth of individual and workplace retirement accounts, especially if there is an employer retirement match. This is free money.