This post on AllFinancialMatters was brought to my attention recently. It brings up two interesting viewpoints. The first one is in the main post, which is about a young employee who thinks he has lived through a second Great Depression and will never touch stocks again (this could be good news for those who stay in the market but it’s just one person). It’s easy to spot the flawed reasoning there, but one of the comments makes a more subtle error – claiming, like many people, that the market will decline further in the coming year and investors should wait until 2010 to get back in.

Even many personal finance blogs that recommend good investing appproaches are now taking this tone, starting many posts by saying “the market will probably decline a lot more in the next year, but…” (at least when they make this prediction they remember that it doesn’t matter as much with a long-term view). This is a good reminder that investment success isn’t found by looking behind you. It’s all too easy to forget that future performance is determined as much by the price you paid for a stock as it is by the performance of the company you invest in.

Even though there’s always a lot of potential for hidden trouble, the current market is too good to resist for me. It may be in part because I just started investing in stocks a little over a year ago, and having seen prices drop so much since then has increased my excitement correspondingly. Anyone investing for the long term should be making regular investments in this market, with extra cash ready to put in when they feel safe (I check my cash balance with every big drop). What many people are forgetting while looking at the recent past is that it just might be a long time before stocks are this cheap again!

As a result of my attempts to educate myself on investing two things are clear: if the market does decline further that’s not likely to have a big effect on my long-term performance (which is what I invest for), and even so it’s not guaranteed to keep going down. If the S&P will sell for 700 next week why would anyone buy it for 800 this week? Those are two good reasons to throw off the fear that’s spreading to more and more people and invest consistently – I’ll keep buying from people who give up on stocks for as long as I can.