Good morning, happy Monday & happy Halloween!
There is no such thing as a worry-free investment. The trick is to separate the valid worries from the idle worries, and then check the worries against the facts.
Peter Lynch, American investor & mutual fund manager
With today being Halloween, I’ll keep my comments brief, or at least briefer 😉 (I know I’ve gotten a little carried away the last few weeks 😉).
Investing can be downright scary, huh?
Here we take our life savings and put in into the stock market only to see a year like 2022 take away a large portion of investment. It seems not only scarry, but downright illogical. Why do we do this to ourselves?!?!
The answer is quite simple … investing in an ownership stake in some of the best, most profitable business in the U.S. and the world is the best way I know to create wealth.
Volatility, like we are experiencing this year, is just the price of admission.
What do I mean by that?
Well, let’s just oversimplify this. From January 1980 to September 2022 (my entire lifetime) the S&P 500 has averaged 11.33%. S&P 500 Return Calculator, with Dividend Reinvestment (dqydj.com). According to the FDIC the current average savings interest rate is 0.21%. FDIC: National Rates and Rate Caps
For this conversation let’s just say the long-term return on an investment is 10% and a savings return is 2%. (Not projecting any return, product, or investment, just using some back of the envelope math here).
Which would you rather earn 10% or 2%? Of course, you would rather make 10%.
But as the saying goes “nothing is free.” And that is most certainly the case in investing.
The cost of admission to investing is volatility.
$100,000 invested 40 years ago at 2% average return is worth $222,405. $100,000 invested 40 years ago at 10% average return is worth $5,370,066.
An even sillier question … would you rather have $222,405 or $5,370,066?
But … and this is the huge BUT … in order to generate those type of long-term returns you have to get a little scared every now and then … now being one of those times. The trick is to not get scared enough to make foolish decisions, like bailing on a beautiful investment portfolio because there have been 10 rough months.
If we could generate a 10% return without risk sign me up. That does not exist. So, we have a choice: either make something like 2% or less in something that does not have volatility (savings account) or pay the price admission (volatility) to make far superior long-term returns.
For me that choice could not be easier.
My job was, is, and always will be to help my clients stay focused on their goals and their plans despite the volatility that is part of the journey. I know it’s not easy, but I wholeheartedly believe the long-term benefits of investing far exceed the short-term volatility price of admission.
I am honored to be a guide during these challenging times. If there is anything we can do to be of assistance, please let me know.
Make it a great week ahead … here comes November! 😊