Why is it so important to stay invested rather than get out of the stock market when I’m nervous?

If you’re nervous because the market has dropped… remember that it has already dropped (however no one can predict when it will rise or if it will drop further). Until you sell, temporary price drops are only a “paper loss”, not a realized loss. It isn’t until you sell/get out that you lock in your losses, and increase the real risk… that you will miss the recovery. For example, between 1/1/96-12/31/15 (which includes the 2nd and 3’d worst market crashes in US history), a person who stayed invested in the stock market achieved an 8.2% annualized return. If that person got out of the market and missed just the 10 best days during that time period, his/her return would have been reduced to just 2.1%, annualized. You have to stay in it to win it, and no one can predict when the market will go up or down. History shows, however, that over long enough time periods, the market goes up more than it does down. That is the reward for taking on volatility risk. See the “What’s worse, market volatility or inflation?” FAQ, and watch the Financial Independence video for a discussion about other risks that are worse than volatility. And, note that the amount a person should have in stock market exposure should vary depending on life stage and specific circumstances/needs.