My grandfather got to go to Europe after he graduated high school. He got an all-expense paid trip out of it too. But that was because of the job he had, as a staff sergeant under General Patton during World War II. My grandpa had to put his life on the line when he was 19. I was working full time and going to college on the side.
I never got around to backpacking through Europe. It was one of those things I meant to do either after high school or after college. But I’m okay with that. It’s something I might get around to eventually. The important thing for me is that I do it on my own terms. I didn’t have to go “over there” as a drafted teenager.
That’s progress. Sometimes, it’s hard to see it. After all, we live our lives one day at a time. The big changes are often gradual. Also, we tend to focus on life’s extremes, the good and the bad. And right now, there are a lot of things that look bad. That makes it hard to see the good.
Why is that? In essence, our brains are still wired with flight-or-fight responses from the days of the caveman.
That makes it challenging to invest competently. Investing requires that we bypass that wiring and look at things rationally—and not just at the extremes.
With all the doom and gloom out there, it’s important to remember that it’s all short-term. Markets tend to have their worst performance in September and October. But over time, investing for the long haul delivers the best returns.
And while we’re exposed daily to reports of terrible events like killings, accidents, fires, floods, terrorism, viruses, the alleged consequences of the upcoming election, and other such things, it’s important to consider those in context.
According to FBI statistics, crime has been on a downtrend for the past 40 years. It’s ticked up slightly in the past few months on the back of unrest, but it’s still safer to walk the streets in a major city today than it was 10 or 20 years ago.
Human lifespans have tremendously increased. That’s great news. It’s partly due to longer life in general, but also due to a fantastic drop in deaths during the first few years of life. That’s why some of biggest medical problems we have today are with issues that stem from our extended lifespans, like cancer and Alzheimer’s. As we continue to live longer, we’ll lick those problems too.
A non-age medical problem has to do with obesity—the “problem” of getting too much to eat. That’s only become a problem within the last few generations. Typically, starvation has been more likely for many people at points in history.
Obesity and cancer are problems, yes, but they’re problems that stem from our progress. That’s why, over the long run, things will work out fine.
All these things tell us that investors should stick with it for the long haul. Not only that, the savvy move is to take advantage of short-term fears to increase long-term results. I haven’t bought as much at one time as I did in early 2009. Markets had a peak-to-trough decline on par with the early years of the Great Depression. That made it a great time to buy for the long-term.
Today, it’s not as great. Markets are still near all-time highs. But even taking advantage of a 10 percent pullback can improve your returns substantially over time.
Our flight-or-fight wiring makes such patience difficult to practice. After all, when a stock is falling, your first thought is to avoid it and take flight. But it might be a great time to buy, fight the instinct to sell, and wait for things to turn around.
I’m cautious. I get it. Market valuations are high. Market corrections in recent years haven’t been few and far between. That’s a short-term headwind. So is the idea that the economy will be permanently stuck in slow-growth mode.
Recently, Rich Dad, Poor Dad author Robert Kiyosaki came out and said, “When you’re investing for the long-term in the stock market, where there is no connection between stock price and reality, you’re crazy.”
He’s got some good points. But they seem to apply to the short term rather than a longer period of time. The crazy thing is to give up on the long-term potential of investing now, simply because the market has gone a few years without a major correction.
The broad market is historically expensive. But many individual stocks have been beaten down and will likely be fine over the long-term. If you expect the world to still run on fossil fuels, for instance, then still beaten-down stocks in the energy sector like ExxonMobil (XOM) or ConocoPhillips (COP) should fare well for you over the long term.
Some investors have gone even further, avoiding stocks entirely, and putting their money into assets like cash or gold. To me, that’s risky to the point of being crazy too. Cash and gold provide useful insurance against market declines.
So, yes, it’s important to invest some, but not too much in those assets. Like an insurance policy, you should have some for a rainy day, but going over 10 percent in either category can put a big damper on your ability to get near the stock market’s long-term average.
Over the long run, things will be fine. Humanity is currently at its most peaceful and productive point in history. There will always be short-term fears. If you can manage to navigate through them, you’ll do great too. At the end of the day, it makes sense that the best investors follow the old adage: Be greedy when others are fearful.
Right now, you should be short-term fearful. But over the long haul, you’d be wise to keep investing. The best way to achieve these objectives right now is simple. Take profits where things have run up. Or hedge. Keep an eye for new opportunities, and a price you’re willing to pay for it. Then buy when that price hits, even if things look fearful. It’ll turn around.
Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and is managing editor of Financial Intelligence Report. To read more of his work, GO HERE NOW.
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