Investing can be tough, and nobody has all the right answers. It often takes decades to see substantial returns on your investments, which can make it challenging to know whether you're making the right decisions in the short term.
That said, the stock market is a wealth-generating machine, and investing is one of the most effective ways to make a lot of money over time. While there's no one-size-fits-all approach to investing, there is one regret that still haunts me -- and there's a very simple way to avoid it.
Managing volatility the right (and wrong) way
When I first started investing, I knew the stock market could be volatile. But I wasn't prepared for how that volatility would make me feel. The first time I experienced even the slightest market downturn, I began to panic and worried that I would lose the money I invested.
From there, I started to obsessively check my investments every day to see how they performed. On the days when my portfolio was down, my concerns grew, and I ultimately withdrew all of my money from the stock market in a panic. I didn't invest at all for several years after that, as I was too worried about losing my investments.
If you're in a similar boat, you're not alone. The stock market can be intimidating, and the daily ups and downs are tough to stomach at times -- especially when your life savings are tied up in your investments.
However, volatility is normal. While it's easier said than done, the best thing you can do is ignore it and stay focused on the long term.
Staying calm when the market is shaky
Investing is a long-term strategy, which can be a good and bad thing. The hard part is that it can take years to see substantial earnings, and it's sometimes tough to see any progress when you first start investing.
The good news, though, is that when you take a long-term approach, short-term volatility doesn't necessarily matter. Your investments can (and probably will) take a hit over the course of weeks or months, but what really matters is their performance over decades. When you're focused on the long run, it's a little easier to ignore the market's daily fluctuations.
To be clear, this doesn't necessarily mean you should intentionally stay uninformed about what's going on with the stock market and economy. But try to avoid making any big decisions based on emotion.
When in doubt, remember that the stock market has experienced dozens of major downturns and made it through unscathed. In the last two decades alone, it's faced the dot-com bubble burst, the Great Recession, the crash in March 2020, multiple wars, and years of political and civil unrest. Despite everything, though, the S&P 500 is up more than 190%.
It's not always easy to tolerate stock market volatility. Even as an experienced investor, there are still times when I feel that familiar knot in my stomach when I check my portfolio during a downturn. These feelings are normal.
However, the long-term rewards of staying invested in the stock market outweigh the potential concerns. If you can overlook short-term ups and downs and keep your money in the market for the long haul, you'll be well on your way to generating wealth that lasts a lifetime.