It’s easy these days to turn on the news or the radio and hear bad news after bad news. This extends to the economy too.
Everywhere we turn, there is a pundit screaming how fragile the stock market is, or how the housing crash is only just getting started or how a recession is just around the corner.
To me it is just noise. Over the years I have learned to tune out all the fluff and stick to my guns. All thanks to a rock solid investment plan based on my goals and investment timeframe.
I put no weight on what anyone says. Even the ‘experts’. They are wrong so often it is laughable.
There is always a reason to be worried if you look for it. Bad news happens all the time. That should not come as a shock to you.
Large floods, earthquakes, depressions, pandemics, fires, terror attacks, wars, and any other large scale event you can think of happen rarely on their own. But when you add all the rare and unlikely events together, there are hundreds, if not thousands of things that could go wrong. Put them all together, and that means there is often going to be something bad going on. Enough one in hundred year events grouped together can mean yearly events.
That is the first thing. Stop acting surprised when bad news happens. It is expected. So adjust your expectations to expect it too, then your investments can match your expectations.
But don’t take it too far. Don’t be paralysed by the fact that bad things will continue to happen at regular intervals. For one, we don’t know how it will impact our investments. Sometimes bad news does not translate to poor market performance. Secondly, if you worry yourself too much, you will never invest in growth assets such as housing and stocks. These are the assets you need to grow your money faster than the pace of the cost of living.
It is so easy for pessimists to sound smart. Listing all their reasons why things will be bad for a long time and to sit on cash. But no one ever got rich being a pessimist. Cash does not translate to wealth. Investing does.
Pessimism is the easy path. If they are wrong they just insert a reason why they were wrong and get on with life. Being an optimist is much more difficult. If someone publicly declares a positive outcome and the result is negative, they will look silly. People can tolerate positive outcomes from a negative forecast but not negative outcomes from a positive forecast.
In short, my best advice is to understand that bad shite happens. Frequently! That is why it’s always a good idea to have your next three or four years of financial needs in cash. The rest can be invested in a mix of bonds, stocks, mortgage etc. What mix depends on when you need the money. Because if you can’t be optimistic about the long term, you will never grow your wealth. Otherwise, sitting on the sidelines waiting for a ‘good time’ to invest may never eventuate.
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The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here