Ric Edelman: I'm going to reveal for you the two major myths that cause lots of people to stay away from the stock market.
First, many people believe that stock prices rise and fall. And many believe that the stock market is risky, volatile and unpredictable, neither of those statements though is true.
Oh sure, in any given day stock prices do rise and fall, but over a long periods, stock prices rise a lot for a long period, they fall only a little for a short time. Imagine a kid playing with a yo-yo while walking up a hill. Even though the yo-yo goes up and down it's constantly at ever higher levels, thanks to the hill's incline. So when you notice stock prices declining, don't get upset, the stock market indexes have gone down, but they've also eventually gone back up to new higher levels.
So, if you have a long-term time horizon, instead of selling your stocks and stock funds and moving the cash when the market drops, consider these periods as an opportunity to buy stocks on sale. This is why it's wrong to assume that the stock market is risky, volatile, and unpredictable, sure, stock prices change everyday, but when you invest money, do you plan to sell just one day later or even 30 days later? Of course not, so who cares about daily or monthly price changes. If you're planning to invest for years or even decades, say for college or retirement, it makes no difference what the market does today. Instead, you should look at the markets performance over longer periods. When you do that, you will find that the stock market isn't nearly so unpredictable or nearly so volatile as you thought. In the 80 tenure year periods, since 1926 the S&P 500 stock index made money 95% of the time, according to Ibbotson Associates. And in every 15 year period and longer, the stock market has made money 100% of the time. So don't be afraid of the stock market.