Here is a fantastic quote from Warren Buffett from 1988 ““If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because the prices have risen for the ‘hamburgers’ they will soon be buying. This reaction makes no sense”
Consider something. Markets have always risen in the US. From less than 100 in 1900 and before, to 26,000+ in 2018. But the ride isn’t smooth. A rational long-term investor, who is always a buyer like Buffett is, should hope for markets to go down and for an extended period of time like they did from 2000-2009. This will increase the chance of even better long-term gains than in usual periods. Most people do the opposite. They buy more when prices are rising and panic and even less when markets are down.
In the reading list I include many academic books, but some of the evidence on human nature is just as important for understanding investing as the facts and figures. In his book Extraordinary Popular Delusions and The Madness of Crowds, Charles Mackay speaks about our natural human nature to be taken in by stories, and how we tend to act against our self-interest. Buy a copy. It might just save you $100,000 or more indirectly over your lifetime.