32 Reasons NOT to Invest
3min video
In today's video, we review a unique reason not to invest in each of the last 32 years.
Video Transcript:
With everything going on in the markets this year, I spent a bunch of time putting together a list of reasons not to have been invested over the last 32 years, giving a reason for each respective year. Each of these events had a significant impact on the market, albeit some more than others, but nonetheless existed as a reason to get out; or not get in.
Many of you watching this will remember each of these events. But here's where it gets interesting if you had let each year’s particular risk du jour keep you out of the market, what would you have missed?
If you look in the upper right corner, you can see the prevailing index levels for the Dow, the S&P 500, and NASDAQ at beginning of 1990. Flash forward to the end of 2021, and you can see in the bottom right just how resilient the markets have proven to be over the long run. In each index, you would have multiplied your initial investment many times over. Now, is this time different? Unequivocally yes, but the truth is, it’s different every time. During times like this, I think it’s prudent to leverage perspective from others too.
Howard Marks, a billionaire investor, gives some insights as to why markets behave the way they do. He says, “In the real world, things tend to fluctuate between ‘pretty good’ and ‘not so hot.’ But in the world of investing, perception often springs from ‘flawless’ to ‘hopeless.’ The way things are seriously overdone in the markets [to either side] is one of the key characteristics of investor behavior.”
Morgan Housel, a financial writer also provides some context as to why this is. He says, “ We are extrapolating machines in a world where nothing too good or too bad lasts indefinitely. Progress happens too slowly to notice, setbacks happen too fast to ignore.” The best way to deal with uncertainty without hiding in a bunker is to save like a pessimist and invest like an optimist. Optimism and pessimism always overshoot because the only way to know the boundaries of either is to go a little bit past them.
Daniel Kahneman, the author of thinking fast and slow, says a key to investing is having “a well-calibrated sense of your future regret,” Meaning, that we should always expect that unexpected things will happen.
I hope this graphic gives you some perspective on the resiliency of the financial markets.
As always, stay the course and stay on point.
