Stock market investing is for the long term

  • Looking further ahead: if you want to invest in the stock market, you should be looking to do it for a longer timeframe than three to five years, says Dave Ramsey (File photograph)

    Looking further ahead: if you want to invest in the stock market, you should be looking to do it for a longer timeframe than three to five years, says Dave Ramsey (File photograph)


Dear Dave,

Iím almost debt-free, and Iíll be finishing my masterís degree soon. Iím not from this country, so Iíll be returning home in the next three to five years. Considering my situation, would investing in the stock market be a good idea? Iíve been reading that the market is about to crash, so I wanted to get your advice before doing anything.

RAHM

Dear Rahm,

If someone could accurately predict the stock market with certainty, that person would be a multi-bazillionaire. Right now, there are also articles out there that say the market is about to boom. There are always ďglass half-fullĒ and ďglass half-emptyĒ articles floating around. I wouldnít avoid stock market investing based on one ridiculous article you read.

However, in your situation you may not want to invest in the stock market right now. History says you stand a fair chance of coming out with less than you put in if you donít leave the money invested in the stock market alone for at least five years. The market cycles up, and the market cycles down. This really isnít a big problem if youíre going to put your money in there, and leave it alone for 20 years or more. But three to five years? The historical data says youíve got a reasonable chance of actually losing money.

So, I probably wouldnít invest if youíre going to be gone in five years or less. Instead, when youíre settled and have a career in your home country, Iíd advise looking into how you can invest there. You might even want to do some research, and find out if you can begin investing there now.

óDAVE

Dear Dave,

Iím debt-free except for my home, and I have a small business with revenues of around $100,000 annually. About half of that is profit, and I typically pay myself 40 per cent of the bi-weekly revenue. Iím in the media business, and I need to upgrade some equipment. At what point do I put back a little more money, or pay myself a little less, to make this happen?

LUKE

Dear Luke,

I know what you mean, man. Weíre in the media business, too, and around my office it seems like we buy more and newer technology every day. Really, itís like a black hole. You could throw money into it the rest of your life, because practically the very moment you open the box itís obsolete.

We finally decided to designate a percentage of our revenues to equipment replacement. Something is always being replaced, but this way weíve got a limit and weíve got something set aside to make our technology needs happen. Itís like the envelope system. If the envelopeís empty, we have to stop buying and put off whatever it is until the cash is available again.

I hope this helps!

óDAVE

ē Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 14 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

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Published Jan 5, 2019 at 8:00 am (Updated Jan 4, 2019 at 9:53 pm)

Stock market investing is for the long term

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