One of my favourite lines that I heard over the past year is, "I have never met a rich pessimist". In order to make money, there has to be a foundational belief that things will improve, and I believe they will.
Napoleon Hill's famous book, "Think and Grow Rich" has an underlying theme - your life will go in the direction of your thoughts. The book is not as much about getting rich as it is about the effect that our thoughts have on our success. Positive people are positive because they choose to think positive thoughts. "Today is a new day and it's going to be a great day," is the mindset that they start each morning. All of us get to choose what we will believe and how we will think - and it will have a direct impact on how we choose to live.
Investing is no different!
There is always a crisis somewhere - always has been and always will be. Life is a series of problems that we must learn to overcome. If you spend 8 hours a day listening to the media you will be filled with fear and panic and the end result is despair. Why is 90% of what the media says negative? Because it sells. Their end game is to increase readership and viewership which in turn, attracts advertising dollars, which is their profit. Negative news sells and they can always find an expert somewhere to support their viewpoint.
When is the best time to be investing?
When you have money to invest.
Is this a good time to be investing?
Yes.
If you don't think this is a good time to be investing, then how would you define a good time to be investing? It has been said, "the markets climb a wall of worry". If you are waiting for the perfect time to invest, you will wait along time, because it does not exist.
A great investor once said, "the best time to invest is when you have money". I would add, that it's always a great time to be investing. There is always an opportunity somewhere. Ilana Schonwetter, an investment advisor at BlueShore Financial, said this in an interview with Wealth Professional, back at the bottom of the market at the beginning of the pandemic, "During times like this, we’re seeing the opportunity to acquire fantastic quality businesses at a discounted price. This is the kind of opportunity we get maybe once in a decade if we are lucky."
The question is where and how?
It's been our experience that people do not want to invest their money during times of uncertainty. I understand that. When the market is at the bottom, no one wants to add money, but, it's actually the best time. But, most of you will wait until the market is heading back up or near the top. The problem is that you miss out on the opportunity of a lifetime. Do you know how much the markets have rebounded since the bottom it reached on March 23? Over 20%. That's both good and bad.
When the markets were reaching new highs every day in late 2019 and at the start of 2020, we couldn't complete the paperwork fast enough. In our opinion, the scariest time to be investing is at the top, when the markets are making new highs every day, not the bottom.
There are two investor behaviours at play here:
1. Believing that anything going in a certain direction will continue to go in that direction,
2. Fearing that they will miss out. FOMO
Both are very motivating emotions. Fear and greed are the two emotions that rule investor behaviour. We have to overcome these emotions if we are going to be successful investors and sleep well at night.
Here are some guiding thoughts to help you become a smarter investor.
1. Investment philosophy. After meeting with hundreds of people and reviewing hundreds of investment accounts, we have can attest to the fact that the people who have had the best returns are the ones who have bought good funds and added money to them each month and have just left them alone to do their thing. We have only seen 2 people be able to pick individual stocks and actually make money. They also spend many waking hours devoted to their portfolio. The easiest way to invest is pooled funds such as Mutual Funds or ETFs. It's nearly impossible for the average person to buy individual stocks and be properly diversified and know when to buy and sell. In fact, you will drive yourself, and those around you, crazy.
The traditional method of investing in a mix of stocks and bonds is pretty much over. Governments have taken on so much debt that they have permanently damaged the credit markets forever. Events, crises and problems are taking place at such a frequent rate that it is impossible for the average person to keep up with it. Fiscal and monetary policy is changing weekly and all of this is having a significant impact on investing, and now, more than ever, we need expert investment managers. Personally, we are moving totally away from owning individual stocks to only owning pooled funds. The average person cannot get the financial and economic data fast enough to make the right decisions. You'll always be buying too late and selling too early. You have to decide if you want to be an investor or a speculator.
2. Dollar cost averaging. This is where you commit to putting in a little money on a regular and consistent basis (weekly or monthly). You are always buying more at various price points and you can take advantage of market volatility. The temptation is to think you can beat the system by timing the lows and highs which no one in history has been able to predict - it's a fool's game. Right now, it would be a good idea to invest on a weekly basis.
3. Asset allocation. You are probably sick of hearing us talk about this, but it's true. About 90% of your growth will come from proper asset allocation. You have to be invested in the right sectors and in the right geographical locations around the world. What sectors and countries will lead to market growth over the next 10 years? The big trends: Technology, Artificial Intelligence, Health Care, e-Commerce, online shooping, Senior's Care, 5G, Big Data, and CryptoCurrency. What countries? The USA will continue to lead in the short term, but countries like India, South Korea, Indonesia, Malaysia, and Vietnam are the emerging markets of the future because they have population growth and the rise of the middle class. Want to learn more? Check out this article.
4. Patience. Investing is like watching kids grow. If you see them every day, you don't notice, but if you only see them every few months you can see a big difference. Investing is a long-term game. If you need the money in less than a year or so, you might as well keep it in a GIC or under your mattress. I have no idea what's going to happen in the next 3-9 months, but I do believe that we'll be much furthur ahead 5 and 10 years from now and you will be glad you stuck with your plan. The economy, especially in Canada, is heading for an incredible challenge, but the stock market and the economy are not the same things and just because the economy isn't looking so good doesn't mean that the stock market is going to be bad.
5. Take action. If you want to invest and make money you have to be a person of action. Stop talking about it and do something about it. Start with $50/week and go from there.
6. Get help. If you do not want to figure this out on your own or comitt countless hours to learning then hire a professional to manage it for you. If you have an investment horizon that is more than 3 years and the purpose of your money is long-term growth then pony up and start now.
7. Understand your objective. This blog is focused on longer-term growth investing with a 3+ year window. If you need immediate income from your investments then you have to look at another strategy. In this case, we would direct you to look at various types of annuities, where you have a guaranteed income stream for life. 5 Guaranteed Retirement Income Strategies to Avoid Outliving Your Money.
You cannot be a successful and intelligent investor if you are going to be ruled by fear and panic. In fact, fear and panic are the two main ingredients in every bad decision anyone has ever made.
You should never stop investing, no matter your age. Here's why? Growth is good. It's good in every area of our lives. Growing physically, emotionally, spiritually, mentally, and financially is good for us now and is good for us for as long as we walk this planet. The moment we stop growing is the moment we start to fade.
The decisions we make and the outcomes we get in life are not based upon what we know, but rather what we believe to be true. The actions we take are based upon our beliefs not our knowledge. Allow me to expand. I trust people because I believe that people are good. I believe I am worthy of love. I believe the sun is going to shine tomorrow and that my best days are in front of me not behind me.
I can show you the stock market charts that show you the upward trend of the stock market for a hundred years and we can both conclude that we know it will continue, however, you can still be ruled by fear, because you do not believe it, and I believe it's not my job to convince you.
Watch your thoughts for they become your words.
Watch your words for they become your actions.
Watch your actions for they become your habits.
Watch your habits for they become your character.
And your character will determine your destiny.
-The Iron Lady
We become what we think, so think carefully.
Probably the biggest risk you can take in life is to not take any risk at all.
Learn more about our Flat-Fee and All-Inclusive financial planning services.
Retirement Income, Investment & Tax Planning,
Willis J Langford BA, MA, CFP
Nancy R Langford CRS
