The stock market is a panic this morning, but you don’t have to be. There are two simple truths you need to keep in mind:
1. Contrary to popular opinion and a few magazine pundits, deflation is NOT bad and doesn’t stifle economic growth. It is, as prominent Austrian school economist Philipp Bagus put it, “a fast, smooth, direct, and ethical way to a sound financial system.” This is the free market doing its job to correct the inflationary interventionism of governments around the world. It may be painful, but even if so, it is the lesser of two evils. If we don’t go ahead and pop the bubble, it will eventually explode — hyperinflation, and that is far worse. Let the market do its job and just ride it out.
2. Time in the market is much more important than timing the market. If you’re in it for the long haul, i.e., retirement or wealth creation, not a quick buck, then riding it out is the best tactic. Think about it — where else are you going to put your money? What other investment isn’t going to feel the ripple effect of the stock market plunge? It’s kind of like changing lanes on the freeway — you’re really probably better off just staying in your lane. Even if occasionally that may not turn out best, the thing is — you have no way of knowing it. You have to stick with the odds, and the odds are, you’re better off holding long. Historically, the people who have sold off in a crash are the ones who lose their money long-term.
So do whatever it takes today to calm yourself down, chill out, and go invest in yourself — that’s something that always pays great dividends.