If you haven’t already started investing, there is no better time to start than right now – take action!
People see investing as complicated; something that takes a lot of work, research and a lot of time and expertise. They also tend to be a little frightened when investing their hard earned money using excuses like “It’s not really the right time to start investing” and “I’ll get in after the next crash” when in reality, when the crash comes, they come up with another excuse along the lines of “It’s all too volatile right now, I’ll wait until volatility calms down.”
For people that see markets like this, the reality for them is that it is never a good time to invest. There is always another boogie man around the corner just waiting to pounce and cause them to lose their money. Here are 4 reasons why now is the best time to take action and start your investment portfolio.
1) We can’t predict the future – No matter how hard we try and how much effort and research we put in, we can’t predict how markets are going to act in the future. This is good because it simplifies investing. There are thousands of people right now analysing the future prospects of CBA shares, looking at all the numerous financial statistics trying to come up with what they believe the company is worth to see how that compares to the current share price so they can determine whether they want to buy or sell the investment. The good news is that this means that we don’t have to.
Markets work in a way that if a security is slightly mispriced, investors continue to buy or sell the security until the price reflects true value. So for us ordinary human beings, all we need to do to see what a stocks true value is, which is to look up its current price.Only new information that people have been previously unaware of will change the share price dramatically and given our inability to predict the future it is not worth worrying about.
2) Investing is a long term game – We tend to concentrate on the short term things rather than things that will impact us over the long term. Investing is a great example of this. The stock market crash of 87 was the biggest one day fall in the history of the markets. On that fateful day, the Australian Market lost a quarter of its value. The worst possible time to invest would have been just before this monstrous crash happened. The below graph shows the Australian market performance during 1987.
However let’s have a look at what happens to the market if we extend it out to 10 years.
The drop is still there, but it’s more of an inconvenience than anything else.
Finally let’s have a look at 30 years and bring it up to 2017.
I can guarantee that you weren’t looking at the huge drop that occurred in 1987. It is simply irrelevant. Investing is a long term game. Not only can we not predict what will happen in the future, we will also more than likely not care about what happened in the past.
3) The longer we are invested, the better compound interest works – What’s better than doubling your money? Doubling your money again. Earning interest on interest is a great feeling and the longer your money is invested, the more money it will earn. If you wait another 3, 5 or even 10 years before investing, you will lose out on all the potential gains in that time.
4) It’s easy – Investing money is easy, with all the online brokerage accounts available, it only takes a few clicks to make an investment. If you aren’t sure what to buy, you can get someone else to do it for you at a small cost by purchasing a managed fund which holds a basket of shares or an index fund in the form of a managed fund or directly on the share market as an Exchange Traded Fund (ETF). This index fund allows you to buy the entire market at a small cost so you don’t have to worry about individual stocks and just let capitalism work for you.
Where investing does become hard is when emotions come into it and it’s handling these emotions which becomes tricky. Unfortunately when it comes to emotions, they tend to encourage us to do the wrong things around our investments. When things are going well we get more confident, maybe even cocky and we take on more risk than we should. In contrast when things go bad we go into our shell a little bit and become more cautious than we should. These emotions are what impacts our investing experience and returns far more than when we actually invest. That’s where JBS comes in.
JBS can help you manage your emotions and help you pick the right investments to maintain an appropriate risk profile allowing you to reach your goals. Don’t sit on the bench, take action now, give JBS a call and we can help provide you with a great investor experience.
– Liam Rutty –