Into The Unknown: The Unavoidable Anxiety Of Investing
You're not alone. Buying stocks has always been scary.
As of this writing the world is looking scary. Russia is still invading Ukraine, an election that could see Donny back in the Whitehouse is around the corner and central banks around the world are wrestling with inflation. Every day it seems another economist or hedge fund strategist is going on CNBC or telling the press that a recession is coming and we should all kiss our asses and pensions goodbye. This, you could argue, is a terrible time to invest in stocks. Why invest when the markets are about to crash?
The thing is, markets are always “about to” crash. The reason experts are always saying this is because the experts are still human and humans, like markets, get anxious when the outlook is uncertain… And its always uncertain because thats how the future works. This is a big part of what makes investing so psychologically punishing: In the moment you literally never know if you’re doing the right thing. However, when we look at the market (in this case the S&P500) over a long time horizon its clear at almost any point in time that investing was probably the right thing to do…
Here’s an interesting exercise. Fire up ChatGPT, pick literally any date and then ask the AI for a few reasons why someone might have been too scared to invest then. Here’s a prompt you can copy and paste adding your own month and year…
What are some reasons somebody might have been too scared to invest in stocks in month, year? Give reasons specific to that date.
Picking a date purely off the top of my head lets try July of 1972…
I cut BearGPT off there because the list of reasons not to invest went on and on. And yet, If you had invested $100 in the S&P 500 in 1973, you would have about $15,319 at the end of 2023, assuming you reinvested all dividends. This is a casual return on investment of… 15,219%.
You can repeat this process all day long. Pick any date in time, ask ChatGPT, and there will have been a hundred reasons not to invest. Remember, those ChatGPT generated bullet points would have at the time been manifesting every day as scary newspaper headlines, radio broadcasts and advice from friends and professionals. Its understandable why so many people keep their savings as cash in the bank. Nevertheless, every single time it would have been better to invest in the markets given a long enough time horizon.
Here’s the real kicker. Even if you had certainty of future events you’d probably still fuck it up. If I had told you in January 2020 that in a few short months a deadly virus was going to spread around the world and that this pandemic was going to cause societal lockdowns and kill almost 7 million people, what would you have done with your wealth? If you were a sane person you probably would have sold stocks and gone to cash. Perhaps you would have bought some gold. This would be a perfectly rational and responsible decision. It would however have been one that cost you a bunch of money because six months (and a load of government intervention) later the market recovered and a year later it was printing epic new highs.
So even with perfect information and complete foresight into future world events it is near impossible to anticipate how governments, central banks and markets will react. The only rational decision then, is to just… Keep… Investing?
And maybe tomorrow we’ll wake up and the market will crash and I’ll look like the biggest shmohawk for publishing this… But then what about the day after? And the day after that? And the day after that…? Hey, Chat GPT…
Blind optimism: The savvy investors’ best friend.
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