Investment Fables: Exposing the Myths of "Can't Miss" Investment Strategies

Chapter 14. In the Long Term … Myths about Markets

If You Wait Long Enough…

Sarah was a patient woman. She believed that good things came to those who waited long enough, and she was therefore not upset when she opened up the statements from her broker and discovered that she had lost 20% over the previous year on her pension fund investments. “It is only a paper loss,” she told herself, “and stocks always come back in the long term.” In fact, she had read somewhere that stocks had never done worse than bonds over any ten-year period in history and that stocks tended to bounce back after bad years. Since she had thirty years left to retirement, she did not worry about her losses.

Sarah's faith in the long term was shaken when she talked to her good ...