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Stop Waiting for the Next Stock Market Crash or You'll Never Get Rich

By Dan Caplinger - Updated Feb 16, 2021 at 8:43AM

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The biggest mistake is never investing at all.

Many investors are scared to death of the stock market right now. Nobody wants to invest at all-time highs only to see the market crash right after they've put their money to work. And now more than ever, it seems like everybody thinks the next stock market crash is dead ahead.

But there's a simple truth to investing: Anyone can get rich in the stock market. A solid long-term investing strategy and the time and discipline to stick with it are all you need to succeed. What stops most people from making their financial dreams a reality is fear -- fear of that next stock market crash.

Person looking at laptop with frightened look on face.

Image source: Getty Images.

If you want to get past that fear, you have to learn two things about the stock market. First, market crashes are inevitable. But second and more important, crashes don't happen nearly as often as you'd think, and they've often just been speed bumps on the road to life-changing wealth for stock investors. Below, I'll share my secret for getting over fear of a market crash, and you can use it, too.

The folly of predicting the next stock market crash

Stock market crashes happen from time to time. They're inevitable. If you invest long enough, you'll eventually live through a crash.

It's only natural to want to be able to predict when the next one will occur. That way, you could sell at high prices right before the drop, and then get back into the market at rock-bottom prices.

The problem is that there's always a reason to expect an imminent stock market crash. When you look back at the past year, just about every bearish call looked quite reasonable at the time. But listening to them only cost you the chance at huge returns.

May 2020: Fear of the double dip

Immediately after the coronavirus bear market in February and March 2020, stocks started to rebound. Many market watchers were skeptical, arguing that a second crash was right around the corner.

That view seemed completely reasonable at the time. Tens of millions of people were out of work, there was no end in sight to business shutdowns, and fears of more waves of COVID-19 cases challenged the ability of the federal government and Federal Reserve to come up with enough stimulus measures to keep things going.

Yet if you counted on that crash happening within a few weeks or months, you were sorely disappointed. In the four months from the beginning of May to the end of August, the S&P 500 jumped 24%, and many individual stocks did far better.

September 2020: Fear of irrational markets, political chaos, and vaccine failures

September brought a minor correction , and that brought out the doomsayers once again. It was easy to look at new catalysts as causes for concern, including the presidential election, stock valuations at more elevated levels than they'd reached before the pandemic, and the slow progress toward a coronavirus vaccine.

Once again, though, if you figured a crash would come before the year was out, you were wrong. The S&P climbed another 10% between the end of August and New Year's Eve. Those who sold at market lows immediately before the November elections missed a rally that would've given them returns of 15% or more.

January 2021: A Washington surprise

People around the world were eager to put 2020 behind them. Yet nervous investors thought that a strong market in 2020 was merely delaying the inevitable, and some expected a quick crash to start 2021. Worries included sluggish vaccine rollouts, Senate elections, and the potential for unrest as the presidency changed hands.

The crash hasn't happened. There's been some stock market volatility, but in just six weeks, the S&P 500 is up another 6% so far this year.

Face your fear

Looking back like this at past predictions highlights some interesting things. First, those making predictions were often right about certain events happening. May predictions of an upsurge in COVID-19 cases proved correct. Vaccines did take longer than hoped to get approval, and their rollout has been painfully slow. Control of the U.S. Senate did change hands, and there were riots in Washington leading up to the inauguration. But what the predictions got wrong was the impact on the stock market.

Second, the cost of giving into your fear has been prohibitively high. The S&P 500 is up 1,650 points from its March lows. It would take a crash of more than 40% to return to those levels. Even if there were a 20% crash, it would only bring the S&P down to the levels where it traded last July.

And last, the one time when people weren't really predicting a stock market crash was before the 2020 crash actually happened. Sure, there were a few prognostications suggesting that the end of the decadelong bull market would have to happen eventually. But they were short on details, and they didn't really lend themselves to any particular action to take.

Accept the next crash

Most important, the 2020 stock market crash didn't crush long-term investors' financial hopes. Those who stuck with the market and weathered the ups and downs are much better off than they were before the crash.

There will be a stock market crash in the future. It won't be fun, and it'll be hard to get through, because all market crashes are hard to endure.

But don't let that next crash become the bogeyman that stops you from investing. Your future wealth is at stake. The only thing to be afraid of is that your fear will be what keeps you from having the financial life you've always wanted.

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