You Have to Invest
by Ben Carlson, A Wealth of Common Sense
Investors are constantly bombarded with negatives these days. Everywhere you look thereâs someone telling you why you canât invest in certain asset classes or strategies:
You canât invest in the U.S. because the bull market is getting long in the tooth.
You canât invest internationally because those countries are a mess and what about the Japan scenario and the possibility of catching a falling knife?
You canât invest in bonds because interest rates are so low and theyâre sure to rise.
You canât invest in bond substitutes because those investments are far too risky and require something of a chase for yield.
You canât invest in different risk factors or smart beta strategies because everyone already knows all about value, momentum, quality, dividends, low volatility and such so factor investing is not going to work anymore.
You canât invest passively because everyone else is now investing that way and theyâre bound to be disappointed.
You canât invest actively because it costs too much and itâs too hard to beat the market.
You canât use technical analysis because itâs only focused on the past.
You canât use fundamental analysis because itâs hard to predict the future.
And I get it â loss aversion is a powerful force and investing is hard.
Iâm a huge proponent of negative knowledge and avoiding huge mistakes. I spent an entire chapter in my book talking about this subject. But at a certain point thereâs only so much stuff you can get rid of before you have to take a leap of faith and take some risk with your capital.
Sure, you could sit in cash, but thatâs a short-term solution to a long-term problem. Eventually you have a have a plan and you have to do something if you expect to beat the rate of inflation over time.
Morningstar recently asked Vanguardâs John Bogle about China, brexit, the U.S. presidential election and all the other things people are worried about these days. I love Bogleâs response:
Well, you can only control what you can control. I think whatever your view of the world is, you have to invest. You canât put the money in the mattress and in this day and age of low interest rates, you canât put it in the money market fund or a bank CD, so invest, you must. Now, you might want to invest regularly. For people that are investing regularly, I would say for godâs sake donât stop investing now. I know the market is not doing much this year, just about where it started a little bit down, but not much and bond yields are still very low, actually lower than they were at the beginning of the year, but you have to put your money to work. The alternative is â I mean, the only way to guarantee you will have nothing at retirement is to invest nothing along the way. So, you have to take your chances.
Yes, risk exists in the markets. Itâs never going to be easy. But the alternative for stepping out into the unknown is the known of never building your wealth. Donât invest. Donât save. Allow fear to control your financial decisions. Stay far away from the markets. Thatâs a great way to ensure that your future self will hate you.
Even a mediocre plan is better than none.
You have to invest.
Copyright Š A Wealth of Common Sense
