The 5-Year Rule for Stock Market Success
00:00:00.000 | This is one that I'm a firm believer in.
00:00:01.880 | The idea here of the five-year rule is that you should only put money into the stock market
00:00:06.440 | that you won't need to spend, that you know you won't need to spend for at least five
00:00:12.960 | years.
00:00:13.960 | The reason dovetails with what exactly I said previously.
00:00:16.320 | The stock market is unpredictable, especially in the short term, and I define the short
00:00:21.600 | term as anything less than three years.
00:00:24.200 | However, if you can keep your money in the S&P 500 for a period of five years, the odds
00:00:30.040 | of you earning a positive real return, real meaning after the effects of inflation, are
00:00:36.180 | actually very high.
00:00:37.800 | The number is about 80%.
00:00:39.200 | So you have an 80% chance, if you can keep your money in the stock market for five years
00:00:44.240 | or longer, of earning a positive real return.
00:00:47.520 | That to me is an acceptable level of risk to take on, although everybody is different.
00:00:52.600 | But if you're going to go for a shorter time period than that, the math is just not nearly