How to Keep the 2022 Stock Market From Bankrupting Your Future

What a year it’s been so far for the stock market. Wild swings are keeping investors on edge, and some of the best-performing stocks of last year are down more than 40% so far this year.

Why? It’s a combination of things, including lower-than-expected earnings reports from major companies, inflation worries, and federal reserve interest rate hikes.

The truth is most investors don’t get rich by day trading. Constantly buying and selling stocks on a daily (and hourly!) basis might sound exciting, but for most of us, day trading doesn’t make us rich.

1. Invest, don’t day trade.

Long-term investors invest in index funds (or high-quality individual stocks) and hold for the long term. Think years. Sometimes, decades. While it’s true that some stocks will go down, history has clearly and consistently shown that most stocks will, over the long term, go up.

2. Think long-term.

How do we know which stocks to invest in? What ones will go up? Which will go down? The short answer is simple: nobody really knows.

3. Diversification is key.

First, timing the market (riskier). With this strategy, we only invest when we think stocks are at their lowest. Then, we hope that stocks go up from there. If we time it right, we stand to earn a lot of capital gains because we invested at just the right time.

4. Dollar-cost averaging is better than timing the market.