How risky is the stock market?

Over the past 100 years, the stock market has had some dramatic swings but it has always recovered far past its prior peak.

Investing in the market is good for long-term savings where you won't need the money on a specific date. If the market turns down, you don't want to be forced to sell your investments at the very worst time. It's good to have some flexibility to let the market recover.

As you can see, investing for the long-term reaps rewards...but sometimes you have to be patient.

“The stock market is a device for transferring money from the impatient to the patient.” - Warren Buffet

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Source: Clarity Personal Finance, Macrotrends

Major market declines

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Here are some important things to keep in mind, though, when thinking about how risky it is to put your money in the stock market:

For you to experience the 40% decline in the market after the bursting of the technology bubble, you would have had to invest right at the peak just before the crash. It's unlikely that you would have put all your money it at that point, so your actual losses wouldn't be as big.
Historically, it has taken a few years for the market to recover from big downturns. You're going to need to have the discipline to stay invested and wait it out.
The S&P 500, the market index shown below, was down in only 12 of the past 50 years, and as you can see in the chart, it always recovers by far more than the decline. It just takes time.
The best way to invest in the market is to avoid trying to figure out when you should get in and when you should get out. You won't get it right so just invest and hang tight. Ride out those downturns.

The simple strategy to avoid stock market risk is to take away decision-making. Don't try to make any predictions or guesses. Buy ETFs or index mutual funds that mirror the market, and hold onto them. Read more here.

This cartoon has adorned my workspace since my very first year in banking. It's a reminder that I cannot predict the stock market and so I shouldn't even try. It's a freeing thought.