Don’t panic when the market crashes. Learn why the stock market is like a dog on a leash and how simple investing can help you reach FIRE.
Introduction
Do you get stressed when you look at financial news? One day the market is up, and the next day it crashes. It feels like a crazy rollercoaster. But legendary investor André Kostolany had a brilliant and simple way to explain stock market volatility. He said the market is like a man walking his dog on a leash. Let’s explore what this means for our Easy FIRE Plan.
The Owner and the Dog
Imagine a man taking his dog for a walk. The man represents the “real economy.” He walks forward slowly and steadily. But the dog represents the “stock market.” The dog runs wildly! It runs far ahead of the owner, gets tired, and then falls behind. It jumps around everywhere. But because they are connected by a leash, the dog ultimately arrives at the exact same destination as the owner.
Right now, it feels like the dog is running far ahead of the owner. Prices are high. Even great investors like Warren Buffett are holding a lot of cash, perhaps waiting for the dog to come back.
Why You Should Not Wait
Hearing this, you might think, “Should I just hold my cash and wait for the dog to fall behind?” For most normal people, the answer is no.
We are not billionaires with huge piles of cash waiting for the perfect medium-term timing. If you try to wait for the “perfect moment” to invest, you will probably fail. By the time you realize the perfect moment was here, it will already be gone. Ordinary people cannot predict the future, and that is completely okay.
Keep Walking: The Secret for Normal People
The good news is that the owner (the economy) always moves forward over the long run. Since the market always trends upward eventually, the smartest strategy is to simply accumulate your assets over time.
This is called “Dollar-Cost Averaging.” You just invest a portion of your salary every single month, whether the dog is running ahead or falling behind. You do not need to be a math genius to do this. You just need patience and consistency.
Conclusion
Remember our core philosophy: Psychology over Intelligence. You do not need to predict where the dog will run today. You just need the good habit of buying good US dividend stocks consistently.
Invest simply. Retire early. Enjoy life sooner. Do you currently invest every month, or do you try to time the market? Let me know in the comments below, and do not forget to subscribe to my free newsletter for more easy tips!