Everyone preaches “buy and hold long term,” but then what?

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The long term comes when you retire. Take it from an old guy. I’d love to go back in time and thank my younger self for all those 401k and IRA contributions that he struggled to make, and for sticking with stocks and not panicking and running during all the market downturns. There’s a line from Cat on a Hot Tin Roof that I really like: “You can be young without money, but you can’t be old without it.” It may seem like your retirement years are a million miles away, but they’re really just around the corner. Of course, there are other reasons for investing besides the long term: emergencies, buying a house, your children’s college fund, travel. It’s challenging, but so is life. Good luck! You’re on the right track, and I envy you your journey.


I’m a little late to the party, but I thought I’d explain compound interest in detail. It’s the #1 reason anyone puts money in the stock market, especially for retirement. Let’s say I put $1000 in my Roth IRA at age 20, and purchase shares of VOO, Vanguard’s ETF tracking the S&P500. The historical average ROI of the S&P is 10%, and average inflation is 3.22%. So each year my money is in the market, my actual purchasing power increases 6.78%, and that new figure is used to determine your next year’s gains: 1 yr – $1,067.8 5 yrs – $1,388 20 yrs – $3,713 35yrs – $9,934 40 yrs – $13,791 After 40 yrs of investing, at age 60, I retire, sell all my shares of VOO, and have over 13x the money I put away when I was younger. Had that money been in a high yield savings account, somewhere around 4%, you’d only have $3,946. (This is a simplified example, and while I think VOO is great, I don’t recommended putting all your money in it, or selling everything at retirement) This compound effect is why starting early is so important, nearly a quarter of all your potential gains comes from the the final years of your investment. Also, while you’re young you have room to make risky investments. You can put $500 on a company you think is the next Amazon. You’ll be able to wait longer to see if you’re right, and you can still decide to move that money to a more stable investment if it doesn’t pan out. As someone else said, I’d recommend getting any kind of job, as long as it doesn’t interfere with school, so you can start contributing. If you’re interested in estimating gains as I did above, here’s the formula: Principal * (1 + ROI – Inflation)^yrs invested This will very roughly tell you what to expect with an initial investment, for modeling consecutive years of contributions, I recommend making a spreadsheet.


A few years before retirement, the investor starts to draw their money out of growth positions and into “hold” positions where they are very unlikely to shrink in value. Then at retirement, they pull the money out, either as a lump-sum or drawing it out monthly to pay expenses.


Our long term has arrived (64 and 69). We have over the years adjusted our allocation to one appropriate for our age. We retired 5 years ago. We took advantage of our lower income after retirement to convert traditional IRA to Roth IRA to grow our tax free pot of $. Husband will take SS at 70. When he reaches 72, instead of just taking rmd, we are considering taking out enough money up to 24% marginal rate. We hope to move as much money out of traditional IRA as possible so heirs will pay less income tax. We are going to spend more $, take family on annual vacations to create memories. We will start gifting more money to family members so they can enjoy inheritance now, instead of waiting 30 years to inherit. To us, figuring how to spend the money in retirement phase is more complicated than the buy and hold phase.


You invest for a purpose. For me, I’d like to have a very comfortable retirement. So, I put money in my investment accounts and plan on investing for 40+ years from now. As I get closer to that retirement age, I will slowly rebalance my portfolio to become less risky, as I will need to begin drawing from it soon. Then, when I retire, I can withdraw the money to spend.