The idea of "losing money" in the stock market is like a financial urban legend. It’s the Bigfoot of investing. You hear about it everywhere, but when you dig into the evidence…not so much. And yet, nothing gets my attention faster than this phrase: “I don’t want to lose money.” It’s another reminder of just how deeply this misconception runs.
At face value, it sounds logical—almost noble. Who does want to lose money? But here’s where the plot twist comes in: the fear of losing money isn’t just a misunderstanding — it’s an entire re-education opportunity.
Here’s the deal. If you invest in mainstream equities, you will experience temporary losses. I don’t sugarcoat that. But the word "temporary" is the key. Let me hit you with some numbers:
Now, if I stop there, you’d be justified in asking, “Why on earth would anyone invest in this madness?”
But here’s the kicker.
During this same period, the S&P 500 went from 108 in 1980 to 3,839 in 2022, producing an average annual return of 11.5%. That’s the kind of growth that makes even Fidelity partners do a double take.
So how can these two wildly contradictory realities coexist? How can stocks both plunge and soar —and leave long-term investors smiling? The answer lies in the most underrated superpower of investing: time.
Time doesn’t just heal wounds; it erases them and then throws a party. Take a look at history:
This isn’t speculation. It’s not a motivational poster. It’s the hard data of nearly a century of market history. And yet, our clients struggle to grasp this because — let’s face it — human nature doesn’t exactly align with long-term thinking.
Here’s an example. Imagine trying to explain turbulence to a first-time flyer. You can show them all the stats about how safe airplanes are and how incredibly normal turbulence is, but what they really need is a calm, trusted voice in their ear during that first flight saying, “This is normal. We’re still heading to our destination.”
What they don’t need is someone making a break for the exit row mid-flight, pulling the emergency handle because they felt a bump. And yet, when markets drop, that’s exactly how people behave — trying to abandon the very vehicle that’s carrying them to their goals.
This is where empathy comes in. It’s easy to laugh at the fear of losing money in the stock market when you’ve been steeped in decades of financial data. But for the average investor? Watching the market drop feels like someone stealing their wallet in broad daylight. Their fight-or-flight instinct kicks in, and logic flies out the window.
Our job as advisors isn’t just to provide data; it’s to guide people through their own emotional storms. To explain that short-term declines aren’t losses — they’re just detours on the road to long-term growth. It’s about helping them understand that while the turbulence feels like chaos, the plane is still flying.
Let me put this another way for the CrossFitters in the room. You all know the workout Fran — it’s a terrible workout. It’s also a really fast workout. For those who’ve done it a million times, it’s uncomfortable but manageable. But for someone doing it for the first time? It’s overwhelming. It feels like absolute chaos.
That’s the difference between experienced investors and first-timers with stock market fears. Empathy is about meeting people where they are.
Now, let’s talk about one of the greatest myths in investing: risk tolerance. People don’t fear risk — they fear loss. And what they often fail to understand is this: Permanent loss in a diversified equity portfolio is virtually impossible for long-term investors.
Even after market crashes that felt like financial Armageddon, investors who stayed the course recovered. Take Dr. Jeremy Siegel’s research. Since World War II, the longest it’s taken an S&P 500 investor to recoup their losses—including dividends—is just over five years. That’s during some of the worst economic conditions imaginable.
The real risk isn’t the market. It’s abandoning your strategy. It’s cashing out in a panic. In short:
You don’t lose money in the market; you lose money by leaving the market.
Again and again, I am asked by people in the industry how I respond to clients who fear losing money. The answer is simple: I reframe the conversation.
I help our clients understand that the equity market’s declines are like bad weather — temporary, frustrating, but ultimately survivable. The sunny days are always ahead.
So next time someone tells me they’re afraid of losing money, I’ll smile, nod, and say, “Let’s talk about what you’re really afraid of — and how time can fix it.”