Is a 'Market Crash' Like Rolling a '1' on a Die? Unraveling Investment Anxiety Through Probability [Part 40]

Last time, I talked about leverage (the principle of the lever) as a 'next-step strategy' to break through the limitations of installment investing. However, there is an absolute prerequisite for this strategy to succeed. That is, 'truly believing in the merits of investing'.

Even while knowing data such as the average yield of global stocks being around 7%, why can't many people take that final step? It is because the fear of 'what if a crash happens...' outweighs logic.

This time, let's think about tips for overcoming that fear by comparing it to a board game.

1. The game doesn't end even if you keep rolling a '1'

Think of a die. If you only roll it 10 times, you might roll a '1' consecutively, or you might find it hard to advance. It is natural for there to be large variations in the results in the short term.

However, we know that even if you keep rolling a '1' along the way, it won't last until the end of the game, and if you roll it enough times, the numbers 1 through 6 will appear evenly. In fact, we also know from experience that it is precisely because of that variation that board games are fun.

The fear of a market crash in investing is the same as this. It can be said that you are overly concerned about 'temporary variations in results while rolling the die only a few times'.

2. The statistics of the die called 'history'

Of course, a market crash itself is not 'fun'. However, long history shows that market crashes in investing are inevitable, and yet, on average, an annual return of 7-10% can be obtained.

There is no absolute guarantee that history will be reflected in the future exactly as it was. However, everyone who continues to invest understands from experience that the probability of this is very high.

• Bank deposits: The principal is guaranteed, but there is almost no prospect of growth.

• Index investing: In the short term, there is a 'variation in results' called a crash, but by continuing to roll the die for a long time, such as 15 or 20 years, it converges to the expected yield.

3. The key to moving toward 'next-step investing'

When you deeply understand this idea that 'probabilities converge if you keep rolling,' you will be able to move toward 'next-step investing' not just for your own living, but to make your family's dreams come true.

In my own experience, having accumulated about 6 years of investment experience, I have actually seen the process of assets growing through the power of compound interest. Because I have this foundation of experience accompanied by realization, I can strategically face even big goals like my family's future (for example, the high cost of my children's education) without being swayed by temporary market fluctuations.

I started thinking about full-scale asset formation in my 50s, but fortunately, I intend to work actively until I am around 70. The fact that I have nearly 20 more years of 'time to roll the die' is enough leeway to make probability my ally.

Finally

Having a foundation for asset formation allows you to design your life with a free mindset.

If you are paralyzed by the fear of a market crash, try taking a slightly longer-term perspective and find the courage to keep rolling the dice. There is no need to be intimidated by a temporary streak of '1's.

To be prepared in the unlikely event that a crash occurs right after you start, you can begin with a small amount, and once you get used to the price fluctuations, you can simply increase your investment amount.

What supports that long-term challenge is a healthy body and mind. I, too, continue to make the 'investment' of maintaining myself daily so that I can keep rolling the dice as an active participant until I am 70.

(I have summarized this next-step investment strategy in this paid article. Please take a look.)

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