If a bear market comes, history says this first investment move can create life-changing wealth

If investing were easy, everyone would make lots of money all the time. Unfortunately, investing is not easy. But the story is very clear: the hardest part isn’t actually picking stocks; it’s about controlling your own emotions. Instead of jumping in and out of the market, as far too many investors do, you should create a long-term plan and stick to it through thick and thin. Indeed, a bear market is coming, although no one knows when, and this one investment move will still help you create life-changing wealth, even when the downturn eventually arrives.

Mercurial investors are difficult to deal with

Wall Street jumps from one hot investment topic to another like a locust. It’s sometimes mind-boggling how quickly an investment theme can gain traction and go out of fashion. One of the best examples is the dotcom bubble that burst and burst at the turn of the century. This is especially important today as another technology bubble is inflating with artificial intelligence (AI).

Image source: Getty Images.

If history is to be believed, spending on AI will outstrip the benefits offered by the technology. Investors will then flee AI stocks for safer shores, even if the technology, as expected, changes the world. If you were around during the dotcom bubble, you know that the upswing is nice and the downswings can be brutal and last incredibly long. But take a look at the chart below, which begins just before the dot-com bubble burst.

SPY data by YCharts

Note that about a quarter of a century later, the Internet sector bear market seems like a minor incident. The same can be said of the Great Recession, when investors rightly feared the failure of the global financial system. This is not a strange time in the market. Going back even further, what seemed like profound downturns at the time look like non-events today.

^SPX data by YCharts

If you simply buy from the market, using a S&P 500 Index (^GSPC -1.82%) tracker such as Vanguard S&P 500 ETF (VOO -1.77%) Or SPDR S&P 500 Trust (SPY -1.77%)you will likely create material wealth in the long term. The S&P 500 is intended to track the U.S. economy, making it a good option for those looking to simplify their investing lives. And, if history is to be believed, you’ll likely build wealth over the long term, even if you start buying right before a bear market. So there is no reason to wait.

Don’t stop investing, even if it goes down

Buy and hold is a good approach, but you’ll probably do even better if you add money to your S&P 500 ETF at regular intervals. This is called dollar cost averaging, and it means that you will buy more when the market is weak (a bear market) and less when it is strong (a bull market). In the long term, however, this will allow you to benefit from a lower cost basis, which will improve your long-term return potential.

And all you need to do to achieve good long-term results is buy an S&P 500 index and keep buying through thick and thin. Unfortunately, this is actually harder than it seems, because emotions like fear get in the way. This is why now is the time to strengthen your resolve. If you do, when tough times come, you won’t let fear stop you from following the essential lessons that history has taught us about investing.