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Comment by blakecaldwell | Hacker News Reader

Yep. If you invest broadly enough, then shrug this off and consider that the market is on sale today. Your existing holdings will return to their yesterday prices at some point, and everything you buy in the meantime will have gone up.

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Pardon my ignorance, but why will the : "existing holdings will return to their yesterday prices at some point" ? The way you put it seems so inevitable (although "at some point" may be 100 years from now). So, as you're not the only one to say that, I'd like to know what makes you think that the holdings will get back to their previous level ? Because, if they increase from their current position, then you certainly imply that they will increase indefinitely, which in turns mean (because you didn't frame that), that putting money on stock exchanges is always a good move, because holdings value increase...

It depends what you mean by holdings. If you mean a basket of holdings that is adequately diversified, then most people assume it is true because it has (almost) always been true. So while Apple may never again be as high as it is today, a portfolio including Apple and 50 other companies can reasonably be expected to go up in the long term. The simplest explanation for this is that the economy generally grows over the long term due to an increase in the productivity of the workforce due to both population growth and technological improvements.

This is what I meant. I'm making the "crazy" assumption that the market hasn't hit the highest peak that we'll see in the next 30 years

There is obviously nothing guaranteeing that will happen. However, it has done so every single time that a correction has happened in the past. This is where the word "faith" applies to the markets.

This is pretty much it.

Thinking rationally, we can see pretty obviously that this is a case of using the past to predict the future. It's never guaranteed to work, but since it tends to be the common sentiment shared among so many investors, it does become somewhat self-perpetuating. At the end of the day, the market does move based on sentiments, after all.

However, it probably is a good idea to try to shield yourself from potential downsides when this sentiments changes in the future (and it certainly can).

It tends to fluctuate within a range but just to play devil's advocate, note that it took about 30 years to recover from the 1929 crash.

It's a good strategy to buy in over time to reduce the risk that you pumped all your money in at the peak of a bubble. It averages things out, so spikes and drops are not as big of a deal.

Your stocks from 1929 would not have recovered for quite a long time, but your stocks from 1925 would only take 6 years to get back in the black.

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