“Investing just got a lot harder” – Really?

Earlier this week, The Business Times had published an article by financial journalist R. Sivanithy titled “Investing just got a lot harder.”

It’s an interesting piece. The basic premise is that loose monetary policy, implemented by central banks around the world in the aftermath of the financial crisis in the late 2000s to stimulate their respective economies, has made it easy for investors to do well. Sivanithy wrote (emphasis mine):

“Stated differently, investing has now become a lot harder compared to the period 2008-2014, when all central banks were easing and all that was needed was to stay long, buy the dips and let loose monetary policy do the rest.

In many senses it was a “no-brainer” – with interest rates cut to zero and with the promise of unlimited money printing by all the major central banks to float asset prices, risk was effectively off the table. Granted, fund managers still had to do some asset allocation to ensure outperformance and justify their pay but by and large, investing wasn’t really that tricky.”

I’d beg to differ. Sure, many stock markets around the world have made stupendous climbs since the crisis reached its trough in early 2009. Singapore’s own Straits Times Index (SGX: ^STI) has more than doubled since bottoming out. The US’s S&P 500 has tripled.

But, for investors to have earned those returns, they needed to do one thing: Stay invested. And, that’s easier said than done. My U.S. colleague Morgan Housel had written a great article back in April laying out precisely this point. He wrote:

“At every step during the last six years [from March 2009 to April 2015,] there has been a persuasive argument that stocks had gone too far, were getting ahead of themselves, and bound to fall.

2009: Economy teetering on a second Great Depression.

2010: Europe debt crisis, flash crash, corporate earnings too high, hyperinflation pounding at the door, CAPE valuation ratios make stocks look wildly overvalued.

2011: Arab Spring, oil prices surge 25%, double-dip recession looms, end of quantitative easing, Obamacare generates some of the most doom-laden headlines ever printed, America’s credit downgraded.

2012: Greece falling apart and taking Europe with it, corporate profits stretched, Bernanke ruining the [U.S.] dollar, taxes going up, weak jobs growth [in the States] meant an entire generation would be left behind, [U.S.] election headlines destroyed your faith in humanity.

2013: Cyprus’s banking system collapsed, American banks sued for all they were worth, [U.S.] federal government shuts down, debt-ceiling showdown risks U.S. debt default.

2014: End of quantitative easing [in the U.S.], China’s economy slows, Ebola, stock hit all-time highs.

You can take this back as far as you want. Every year without exception there is a reason to worry and sell stocks.”

Investing has never been easy – and will never be easy – because it’s tough to have faith that whatever problems the world is facing now will eventually be solved or fade away. But, that faith is really the key to success. “Keeping the faith and stock picking are normally not discussed in the same paragraph, but success in the latter depends on the former,” super investor Peter Lynch once wrote in his book Beating the Street. 

There will never be an easy time to invest because there are always reasons to steer clear from stocks. But, it’s those who keep the faith who are eventually rewarded.

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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 doesn't own shares in any companies mentioned.