I was cleaning out some files recently when I came across a 1992 Investors Guide from The American Funds Group. The 20 page brochure was in mint condition, having been buried in a file for many years. As I flipped through the pages, I came across a chart that is called “The Reasons Not to Invest” chart. Going back to 1934, The American Funds highlighted a problem in the world each year that can cause an investor to “not” invest, to wait until times are better or the problems in the world not so severe before investing in the stock market. There is no doubt that some of the problems in the past were severe, including the following:
1934- The Great Depression
1941- Pearl Harbor and WWII
1962- Cuban missile crisis
1963- JFK’s assassination
1987- Record setting 22% drop in the stock market in one day
I ordered the 2016 Investors Guide and, sure enough, the same “Reasons Not to Invest” chart was still in the guide, 24 years later! Although the problems had changed, it still wasn’t hard to find a reason not to invest from 1992 through 2015, including the following:
1999- Y2K concerns
2001- 9/11
2008- The Great Recession
The point of the chart is two-fold: There have always been problems in the world, reasons that make it intellectually difficult to invest in the stock market, and there probably always will be. More importantly, despite these problems, an investment in the stock market has increased in value significantly, averaging over +10% per year gain for the 82-year period measured.*
What will be the “winning” reason not to invest in 2016? Will it be the upcoming election, the Fed starting to raise interest rates, or Britain’s exit from the European Union? Will you choose to focus on the problems, or instead stay focused on a long-term investment strategy that includes stocks, that can help you work towards your most important financial goals?
*Modus Advisors strives to help clients develop an investment strategy that addresses their objectives and risk tolerance. Investing involves risk, including the risk of loss of principal, and results cannot be guaranteed. The returns shown are for the S&P 500, with reinvestment of dividends, from 1934 through 2015 (Source: The American Funds ICA Guide, 2016 Edition). It is not possible to invest in an index directly.
