Lump-Sum Investment or Regular Buying? When you receive an inheritance or another large sum of money, have you ever wondered whether to invest it all at once, or spread the money out and invest it gradually? The past 150 years of history tell us that the North American stock market rises roughly two out of every three years. From a statistical perspective, the longer your money stays in the market, the more likely it is to grow. Therefore, the solution to this dilemma is to invest it all at once, while remaining aware that the market could drop at any moment. If you are uneasy about lump-sum investing, you can set up a simple system for incremental investing (for example, investing 25% of the total amount on the first day of every month, continuing this for four months).

While trillions of dollars are managed by Wall Street professionals who charge high management fees, it is usually the managers who reap huge profits, not the clients.

Don’t think you know more than the market; no one knows the market better than the market itself. Don’t act based on your own judgment—you might think it’s just your idea, but millions of people think the same way.

The reason the power of compounding is so counter-intuitive is that we rarely view time as an ally. Over time, everything around us seems to degrade and lose value. The top-tier computer you bought a few years ago starts slowing down; the house requires expensive maintenance to withstand the elements; even our bodies age. In investing, the situation is exactly the opposite. Investing is one of the few areas where time is on our side.

Investing is frustrating because we always feel we could do better. If we invest during a market downturn, we will be disappointed for not investing more when the market rapidly rises. If the market drops after we invest, we will regret our bad luck, thinking we should have waited longer.

This emotion is widespread, and as investors, we need to recognize it. We can always do better, even if we are right, even if we achieve excellent returns—we can always do better. Investing is almost certainly going to be frustrating, at least in the short term.

If paying attention to the latest economic developments could make people wealthy, journalists would already be millionaires. Dear reader, here is a secret: journalists are not millionaires!

News applications aim to draw you into their echo chamber from your phone’s home screen, allowing them to display ads and monitor your behavior. To you, the news is not important information; it is bait designed to pull you out of your life and trap you. Turn it off.

In my opinion, the most insidious articles are those that explain why a certain company’s stock rose or fell. These articles are titled things like, “Bank of America Stock Drops Today, Here’s Why,” or “Three Reasons Why Netflix Stock Plunged.” The tone of these articles often makes us believe that the author knew the drop was coming and graciously took the time to explain it to us—a small miracle. This makes people even more convinced that predicting a drop is possible. In fact, the authors of these articles often don’t know the stock’s movement; they are merely hindsight experts, writing to attract investors to click.

What smart investors do is forget what might happen and prepare for possibilities through diversification, rational asset allocation, and patience.

In the short term, the stock market is like cocaine—never let it affect you. In most cases, company profits grow over time, and that is the key. What is important is the systemic nature of the investment. Therefore, becoming a good investor requires extreme self-discipline.

In my line of work, selling advice earns more than following advice. This is one of the conditions for the magazine industry to survive; the other is the reader’s short memory.

Warren Buffett once said that even if epoch-making disasters like war or pandemics occur, we should not stop investing. In a letter to shareholders, he recounted how his 11-year-old self, on March 11, 1942—three months after Japan attacked Pearl Harbor—purchased his first batch of stocks.

In the three days before Buffett bought his first stock, the front page of The New York Times was headlined: “Japanese Forces Break Through Malayan Defenses.” The next day, the paper announced: “Japanese Forces Invade New Guinea from Two Points, Occupy Yangon, and Advance on the Western Front of Burma.” The news on the third day was: “Enemy Artillery Approaches Australia, Claiming 98,000 Surrendered in Java.”

The times are always uncertain; violent events constantly threaten world peace, and the risk of economic recession and depression always accompanies us. Here is a brief summary of negative events over the past decade:

  • Russia and Ukraine launched a large-scale conflict, resulting in thousands of deaths.
  • Severe riots erupted in the U.S. Capitol in Washington D.C.
  • The COVID-19 pandemic caused millions of deaths, leading to a stock market crash and global economic recession.
  • Rebel armed groups attacked oil refineries in Saudi Arabia.

Long-term optimists predict that the world collapses roughly once every decade.

A stock market crash is like lightning; it can freeze even the most rational person. However, just as lightning ushered in the electric age, a stock market crash should be welcomed by most of us.

Many people believe they can handle a market crash without panicking. But a market crash is not just a notification popping up on your phone screen. We calculate our losses in our hearts—losses that might equal several months or even years of our salary—and only then do we feel genuine panic.

The S&P 500 Index averages three declines of 5% per year.

Over the past 100 years, the S&P 500 Index has experienced a 10% drop roughly every 16 months. Over the last century, a 20% drop occurs on average every seven years. Since the 1950s, the S&P 500 Index has also experienced three drops of about 50%, averaging once every 22 years. This famous “market volatility” is so common that we shouldn’t be surprised by it, yet it always surprises us!

The losses caused by declines are usually temporary. For example, since World War II, the market has only needed four months on average to recover from a maximum 20% drop and return to its previous level.

Market returns are never free, and never will be in the future.

Market adjustments are not a flaw in the financial system. Accepting that investing involves losses is the price you pay for long-term growth. No adjustment, no risk; no risk, no reward.

Setting new highs is the norm, not the exception. Therefore, if you delay investing because the market is strong or at a new high, you might delay for a long time!

Since 1928, the S&P 500 Index has set a new historical high on average every 20 trading days.

From 1926 to 2019, the S&P 500 Index rose for nearly three out of every four years. What about the year after a bull market? The index still rises…

After a stunning and absurd surge, such as when the index rises by 50% in one year, it should obviously take a good pullback, right? But that’s not how it is. Historically, after an incredible year of growth, the market’s return in the second year is indeed negative, with an average return of -1.5%. But after that year of 50% growth, the market’s average return three years later is 42%, and five years later, it is 66%, not including dividend payments.

If investing were easy, everyone would be rich. Investing shouldn’t be easy; those who think it is easy are foolish.