The Importance of Avoiding the One Big Mistake

If you had invested $10,000 in global stocks 50 years ago, how much money would you have now? Come up with an estimate, then check out the answer at the bottom of this article. Now, let that number sink in for a minute. The sheer scale of this growth in wealth over five decades is difficult to comprehend, but it is not the result of astute stock picking, successfully timing the ups and downs of the market, or some other form of financial wizardry; it represents an annualized return of 11%, which is the return you would have earned if you had bought a global stock portfolio, automatically reinvested the dividends, and never touched it for 50 years.

It is a simple mathematical fact that the power of compound interest is enormous, and its benefits are available to anyone who would like to participate. Yet, tragically, few investors experience returns of this magnitude over time. You can make the correct initial investments and have a high degree of confidence in the long-term reward, but making even one false step along the way can ruin the math.

The one big mistake

Harnessing the power of compound returns is simple in theory: Invest your money, leave it alone, and wait. Simple in theory, but not easy in practice because the road to riches is beset by the distractions of “get rich quick” investment fads and crisis-driven panics. In order for the power of compounding to work, you need to remain committed and fully invested despite the noise around you. Pulling out of the market—the one big mistake—can significantly derail your progress.

For example, what if you remain mostly disciplined but sometimes pull out of the market when current events are not to your liking? Missing only a few days or months will not have a significant impact on returns, right? Actually, the results can be startling. If you were fully invested most of the time, but missed out on just the one best week of the past 25 years, your overall wealth would be reduced by 16.6%. Missing out on the best three months of that 25-year period would reduce your wealth by a sobering 29.5%.

Why are these numbers so dramatic? Because a high percentage of the market’s gains are concentrated in short bursts, which tend to occur soon after the most dramatic negative events; if you miss these bursts, the compounding opportunity is significantly diminished.

It’s different this time

Armed with this knowledge, the correct course of action is clear: Leave your investments alone. Yet avoiding that one big mistake remains difficult because you have to deal with each market crisis as it occurs, and each crisis brings a renewed feeling that it is somehow different this time and the world is coming to an end.

Over the past 50 years, the stock market has been plagued by a wide variety of calamities, including the Arab oil embargo in the 1970s, skyrocketing inflation in the 1980s, the dot-com crash in the early 2000s, 9/11, the 2008 global financial crisis, and, most recently, the COVID-19 pandemic. But the proper response to any crisis is the same: Stay calm and, when it comes to investing, leave your money alone. Investors who made the mistake of exiting the markets in response to these events likely missed out on the dramatic unannounced rebounds that followed. In the 12 months following the end of the dot-com bust, global stocks were up by 45%. After the global financial crisis, the 12-month return was 53%, and after the pandemic, it was 55%. Missing out on any of these returns would have been an enormous mistake. Investors who endured these crises rather than reacting to them were able to capitalize on the full benefits of compounding over time.

Woody Allen once claimed that 80% of success is showing up. As it relates to investing, his claim is an understatement. If you merely show up—and make a commitment to staying in the market—the forces of capitalism and compounding can make you wealthy without requiring you to take any further action. Just be sure to avoid the one big mistake.

Answer: $1,856,200. Source: MSCI

The original version of this article was written by Heritage for the July/August 2025 edition of The Light, a local magazine serving Broward County, Florida.