It is ingrained in our societal message regarding investments that stocks are risky and bonds are safe. We all “know” this because we are told it, explicitly and subtlety, every day. Because of this, individuals in our country, and indeed around the world, have tens of trillions of dollars invested to earn 3% or less guaranteed (to not be more).
Stocks/Equities/Ownership investments we are told, are risky because they fluctuate and you could be “wiped out” if you invest in them at the “wrong time”. Most of this is based on misinformation and plain ignorance, and people pay a very dear price for not knowing. Which is why we will never stop educating.
Imagine you were an owner of just five of the world’s largest companies – for example, Royal Dutch Shell, Apple, Walmart, Daimler-Benz, and CVS. You would own five companies in very different businesses that last year generated about $1.3 Trillion in revenues while employing some 3 million people all around the world. So in the face of the constant message that stocks are risky and you must be careful to time your investments because of this risk, ask yourself one question. What event can you imagine that would cause those five companies to permanently lose value at the same time?
– A terrorist attack? The S&P 500 index closed higher on October 11, 2001 than it did on the day before the 9/11/2001 attacks. The millions of employees of the hundreds of companies in your growth portfolio did exactly what we all did that day after that horrific attack – they went to work all around the world. What else would they do?
– The election of a political figure somewhere in the world that some people don’t like? The corporate management teams of the hundreds of companies in your portfolio (because you are dramatically more diversified than just owning 5 companies) are charged with seeking the best return on investment for their shareholders. Should some political figure pass some law that will restrict that return on investment, it is their job to adjust their allocation of resources and capital to seek a better return. And in turn, it is the job of the money management teams that we select to run the funds in your portfolio to select the corporate management teams that provide the best return. (There’s a lot going on behind the scenes to provide you with your overall investment returns.)
– Another infamous crash? Remember the “Crash of 1987”? Did you know that the US stock market had a positive rate of return in 1987? The market rose dramatically from January to August, fell sharply, and recovered some by year end. If you had been in a coma for most of that year you may have mistaken it for a boring year!
Ultimately the message remains the same. Ignore everyone who is trying to get you to worry about your portfolio. And ignore anyone who tries to convince you that you should try to time the fluctuations, especially if they try to convince you they have a successful method of doing so.
Spend time with the people that matter to you, doing the things that matter to you. It’s highly unlikely anyone has ever said on their deathbed that they wished they had watched more news! Turn off the news and go watch the sunset!