By Shaw Pritchett
We say it pretty frequently, but there is always something to worry about. Today, we are taking a break from worrying about inflation to think about a war in Israel. There’s nothing wrong with worrying about what’s going on in the world — it’s human nature to be concerned about threats to our well-being. But many people I talk to these days let their propensity to worry dictate their investment decisions. Clients want to wait until it is “safe” to invest in the market. While I don’t necessarily disagree with making safe investments, I don’t think it’s good policy to do it out of fear of what “might” happen.
I thought that it might be interesting to look back a decade ago to review the reasons not to invest in stocks in 2013 and see if it would have helped us as investors. A review of the Wikipedia page for that year tells us about some terrifying things that were going on:
• North Korea conducted its third underground nuclear test in February.
• Two Islamist terrorists detonated a bomb at the Boston Marathon, killing three people.
• Edward Snowden disclosed a secret U.S. government surveillance program and fled the country.
• The president of Egypt was deposed in a military coup that lead to rioting.
• The U.S. government shut down in October over funding of the Affordable Care Act.
I’ll bet you remember some of these stories, but it’s likely none left a lasting impression on your life.
With everything going on, would you have considered investing in stocks? It would have been a mistake not to. On December 31, 2012, the Vanguard S&P 500 ETF (VOO) closed at 130.38. If you had invested that day and stuck to your guns, you would have been rewarded by watching it increase to 169.15 (almost 30 percent) by December 31, 2013. Continuing to stick through the challenges in the news would have led to that original investment growing to 392.70 by September 30, 2023, a 201-percent increase (excluding dividends). Throughout that time, we survived crises in the Brazilian economy, the Chinese stock market, Brexit, an Ebola outbreak, COVID-19, contested elections, etc.
In 2033, when we look back to this year, do you think investors might reflect on how temporary losses were avoided by waiting to invest until the coast was clear? Do you think “safety” will have reemerged in the world and/or the economy giving us an all-clear signal to invest again? By now, we certainly know the answer is no.
What Lessons Can We Learn From This Walk Down Memory Lane?
• The investment news media’s goal is not to build your wealth or protect your retirement income. Don’t take your investment cues from them.
• There will always be something to worry about. The only way you will lose a substantial portion of your wealth is if you panic and sell.
• Though we may not like the way the world seems to be evolving today, our best approach is to avoid letting emotion dictate our investment decisions.
Shaw Pritchett / 334.240.3679 / [email protected]
Shaw Pritchett is a Principal and Financial Advisor with Jackson Thornton Asset Management in Montgomery.
