I was reading an interesting Q&A session on Vanguard’s site about investing, when I came across this small but remarkable example of how to explain anyone about benefits of long term investing. An investor named Rick Ferri shares his experience about how he tried to convince his daughter about not selling her stock portfolio (or funds) when markets started falling.
And rest of this post is copied from that interview:
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My daughter had saved up a couple thousand dollars, and we had invested in the total market fund.
And it went down.
She started panicking and wanted to sell.
I said, “I’ll make a deal with you. I will guarantee all of your losses 10 years from now if you split all of your gains with me 50/50.”
And she thought about it, and she said, “No, I’m good.”
I got her to think long-term, and she’s never forgotten that. I think that was a good lesson.
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PS – I think this example is indeed a very convincing way of making someone realize about the benefits of staying invested for long term. What do you think? How do you convince others about the benefits of long term investing?