My colleague Morgan Housel pens a column for the Wall Street Journal periodically and one of his latest pieces, titled 16 Rues for Investors to Live By, contains advice which I think many investors tend to overlook: “14. There is no such thing as a normal economy, or a normal stock market. Investors have a tendency to want to “wait for things to get back to normal,” but markets and economies are almost constantly in some state of absurdity, booming or busting at rates that seem (and are) unsustainable.” In my conversations with people and through my daily observations,…
My colleague Morgan Housel pens a column for the Wall Street Journal periodically and one of his latest pieces, titled 16 Rues for Investors to Live By, contains advice which I think many investors tend to overlook:
“14. There is no such thing as a normal economy, or a normal stock market.
Investors have a tendency to want to “wait for things to get back to normal,” but markets and economies are almost constantly in some state of absurdity, booming or busting at rates that seem (and are) unsustainable.”
In my conversations with people and through my daily observations, it appears to me that many investors do really want to wait for “normalcy” to return before they are willing to invest.
They are worried about things like a slowdown in the global economy or the after-effects of America’s large-scale experiment with money printing (otherwise known as Quantitative Easing). But as Morgan pointed out, there is no “normal” in the world – there are always things to worry about.
Here’s a (partial!) list of the world’s crises and disasters that I’ve borrowed (and added to) from one of Morgan’s previous works:
“[2014: Ongoing collapse in oil prices
2013: Cyprus bank bailouts; US government shuts down; Thai uprising
2012: Speculation of Greek exit from Eurozone; Hurricane Sandy]
2011: Japan earthquake, Middle East uprising.
2010: European debt crisis; BP oil spill; flash crash.
2009: Global economy nears collapse.
2008: Oil spikes; Wall Street bailouts; Madoff scandal.
2007: Iraq war surge; beginning of financial crisis.
2006: North Korea tests nuclear weapon; Mumbai train bombings; Israel-Lebanon conflict.
2005: Hurricane Katrina; London terrorist attacks.
2004: Tsunami hits South Asia; Madrid train bombings.
2003: Iraq war; SARS panic.
2002: Post 9/11 fear; recession; WorldCom bankrupt; Bali bombings.
2001: 9/11 terrorist attacks; Afghanistan war; Enron bankrupt; Anthrax attacks.
2000: Dot-com bubble pops; presidential election snafu; USS Cole bombed.
1999: Y2K panic; NATO bombing of Yugoslavia.
1998: Russia defaults on debt; LTCM hedge fund meltdown; Clinton impeachment; Iraq bombing.
1997: Asian financial crisis.
1996: U.S. government shuts down; Olympic park bombing.
1995: U.S. government shuts down; Oklahoma City bombing; Kobe earthquake; Barings Bank collapse.
1994: Rwandan genocide; Mexican peso crisis; Northridge quake strikes Los Angeles; Orange County defaults.
1993: World Trade Center bombing.
1992: Los Angeles riots; Hurricane Andrew.
1991: Real estate downturn; Soviet Union breaks up.
1990: Persian Gulf war; oil spike; recession.”
It is easy to look at any of these events and be scared out of investing. But, here’s the incredible kicker: The S&P 500 (a broad market index in the U.S.) has gained 478% since the start of 1990 while the Straits Times Index (SGX: ^STI) in Singapore has grown by 122%, both without accounting for dividends. Since the start of 1997 (note that this is before the onset of the Asian Financial Crisis), companies like Vicom Limited (SGX: V01) and Raffles Medical Group Ltd (SGX: R01) have gained 873% and 731% in price because their earnings have gone up manifold as well over the years.
Source: S&P Capital IQ
These are great examples of how businesses and economies do manage to grow handsomely even in the face of trouble. So, rather than wait for a non-existent “normal state of affairs” to arrive, why not start looking for opportunities to invest instead? If you can find strong businesses with good prospects and which have reasonable (or even cheap) share prices currently, then now would still be the best time to invest regardless of whatever else is going on around the world.
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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 Chong Ser Jing owns shares in Raffles Medical Group.