I reached out to every client in our practice last week and many clients said something like:
“I bet your other clients are freaking out right now. Eric, I’m fine. I’m a long-term investor.”
Some even went a little further:
“How are you doing Eric?” “I’m sure you’re stressed with those clients.”
One client asked me “Could I lose everything? Could it all go to zero?” Then, before I could answer, he goes, “I know that’s not possible. I just wanted you to reassure me.” We talked about other difficult time periods to invest.
A few MORE reasons not to invest
Our clients know this, but in case you need a longer-term example
Up and high to the right…
You and I: We get paid to take risk
It’s impossible to know where we are in the cycle, but in my opinion, I feel we are in this “anxiety” to “panic” range:
Could I be wrong? Of course. I hope the worst is over too. Stocks are down 23% and bonds are down over 11%, using the U.S. Barclay Aggregate Bond Index, and Standard and Poor’s 500 Index as of June 20th, 2022.
There’s always uncertainty, and each time it feels like it’s the worst ever
Russia’s conflict with Ukraine, four-decade high inflation, cryptocurrency gains being vaporized, gas prices at historical highs, bonds on pace for their worst yearly return on record, and the Fed is still raising rates with consumer sentiment at one of the lowest ratings ever.
Could it get any worse?
Up and onward
If we look at history, uncertainty is the reason we get paid. It’s called the equity risk premium. Simply put, stocks are risker than cash. We get paid more to take risks. Historically, using longer-term rolling returns, we (usually) end up with a lot more than we started.
Don’t forget: We accept volatility, drawdowns, and negative headlines for the positive average returns that help us retire, buy a home, put our kids through college, start a business, get married, and reap the benefits of being a long-term investor, and putting up with the uncomfortable periods of investing.
It’s never easy (though it may have felt that way for a few years)
Uncertainty will be present. That’s how you get paid. There’s always a reason for cashing out and waiting for better times. Except when better conditions come, the reward is over. You miss the incredible power of long-term compounded returns.
There will always be more reasons not to invest when it is best to, it’s up to you whether you want the long-term returns for daring to think otherwise.