Why Suze Orman Says It’s Very Hard To Be Pessimistic When It Comes to the Stock Market
Written by
Ellie Diamond
Edited by
Amber Barkley
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Suze Orman believes humans aren’t hard-wired for pessimism, at least not in money matters — like investing. In her Women & Money podcast episode “Suze School: Four Things You Need to Know Now,” Orman explained why she’s always felt more comfortable betting on a growing market and how the markets have supported her optimism.
If you’re ready to get started, learn about Orman’s investing blueprint.
The Markets ‘Like’ To Go Up
“It’s always been brighter for the future when you’re investing in the stock market,” Orman explained. “It likes to go up more than it likes to go down.”
It’s hard to prove whether that’s true, but the overall rise in stock value is real — market data supports Orman’s theory that the markets go up more than they go down. A glance at the S&P 500 Index returns shows a growth history, with periods of setbacks and recovery along the way.
“Even when they go lower, they return, and they go higher,” she said.
That’s true in the long and short term. The past 10 years have seen significant dips in the market, particularly at the beginning of the COVID-19 pandemic and at several points during the recovery period. But despite these dips, the market remains in better shape overall.
Betting on a Declining Market
As an investor, Orman admitted that there have been times when she’s expected the market to go down. She would bet on those declines in one of two ways: shorting the market or buying puts.
Shorting the market, or “short selling,” involves borrowing a stock, selling it, and then buying it back and returning it after it has — hopefully — dropped in value. The other strategy is buying a put option, which gives you the right to sell a security at a set price by a specific date.
For Orman, these strategies feel counterintuitive to what she sees as a nationally shared financial optimism. For her, the historic increase in U.S. stock prices reflects a desire for things to improve and grow.
‘I Felt So Horrific’
Orman said she didn’t have a positive experience buying puts and short-selling stocks. She simply didn’t like betting on something declining.
“Every time I did that, I felt so horrific wanting the market to go down,” she admitted. She explained feeling like a “financial traitor,” going against the natural way of the country and its love of growth.
She couldn’t stand the desire to decline, and she hasn’t used those strategies again.
Mindset and Investment Behavior
“I think it’s in the psychological makeup of human beings that they want things to go up more than … they want to profit from it going down,” Orman said.
Other money experts agree. The Corporate Finance Institute explained that optimists believe the market will turn out in their favor and keep money invested despite setbacks. Pessimists are less able to see losses as temporary and often sell at the first sign of trouble.
Financial services expert Nick Murray agrees with the value of economic optimism. In the classic industry text “Simple Wealth, Inevitable Wealth,” Murray encouraged investors to hope for the future.
“If you can’t see a positive future outcome, you’ll never stick with your investments long enough to find out,” he wrote. “No one can plan for the future — much less invest successfully in it — without believing in that future.”
Market Trends and How To Ride Them
Orman believes financial optimism — the general desire for markets to increase — is responsible for those markets’ success.
Of course, if you invest long term, temporary market dips are inevitable. It’s in the nature of markets to go up and down. Orman believes in riding these out with a steady investment strategy called dollar-cost averaging. This involves investing a set monthly amount, regardless of share prices. You buy fewer shares when prices are high and more when prices are low.
“If [prices] go lower, and you’re dollar-cost averaging, you take advantage of it,” she explained.
Say you invest $100 every month. Your chosen stock costs $5 per share in January, so you buy 20. A market dip means the same stock costs $4 in February, and you buy 25.
You’ll benefit more from your February investments when the market recovers because you purchased more shares. You kept investing even through temporary declines, and your portfolio is richer.
Of course, there’s never a guarantee when it comes to investing. Risk always exists, whether you invest optimistically or pessimistically. But history sends a clear message: Good things come to those who wait.
More From GOBankingRates
