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What Is Scarier Than Investing In An Uncertain World?

Oil prices are going to stay low for a long time. The price of crude palm oil will remain depressed at RM2,400 per tonne for the whole of 2015 after falling from a high of RM3,800 per tonne at the start of 2011. The property bubble is bursting soon in China.

The above are just some of the predictions I have been hearing about the financial markets from watching the news lately. It has always amazed me – how can these prognosticators know with certainty that these events will happen?  

Sadly, I have not found the crystal ball they possess yet. So, I can’t tell you how the price of oil, shares, or the property market will move. If you think I am filled with uncertainty regarding the financial markets – you’re quite right.

And being full of uncertainty can be scary when inevsting. However, even with my ignorance on many matters, I still believe that not investing is far scarier (and I can say this with certainty – how’s that for a change?) and I’m going to show you why.

Investing uncertainly

Despite all that I’m unsure of, these are things I’m certain about: I know that I will need more money in the future as compared to my current situation; and I know that my money is fading in value day by day while sitting quietly in the bank due to the effects of inflation. A hundred dollars a decade ago is just worth so much more than a hundred today.

So, if you’re not doing something about inflation, all your hard-earned savings will be slowly drained away.

From this, I trust it’s obvious to see that there are two choices: 1) To not invest and lose the value of your money for sure; or 2) invest your money, knowing there is a chance of at least maintaining (or even growing) the value of your capital.

There is a catch in the second option though, and that is we might lose money in the short term with investing. However, the longer we stay invested in the broader market, the lower the odds of us losing money.

For example, the SPDR STI ETF (SGX: ES3), an exchange-traded fund which tracks the Straits Times Index (SGX: ^STI), has had a negative return for investors over the past two months. However, over the past 12 years, investors would have enjoyed an average annual return of 8.5% from it since 2002. That’s certainly more than enough to cover inflation risks.

Foolish Summary

It is ok to be uncertain about many different things while investing. In a similar manner to other things in life, we might never have all the answers to questions we have about a particular company or the timing of the investment. But, what is a scarier prospect? To possibly be wealthier through investing or to certainly be poorer by not investing?

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.