I’ve been doing this for a quarter of a century — writing about the stock market and investing. It has been a turbulent journey, including Russian defaults, emerging market crises, point-and-shoot disasters, terrorist atrocities, global financial collapses, a U.S. housing collapse that rivaled the Great Depression, inflationary panics, deflationary panics, energy crises, sovereign debt crisis, and a global pandemic.
All this time, some very wise people have assured me over and over again that the world is over.
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And after all this, this is what the whole long saga, often in the most difficult way, has taught me about such an agitation.
People who panic and sell the shares of their retirement wallets right here will end up kicking themselves. Maybe not this week, this month or this year. Maybe not even for a couple of years. But finally, and to the great times.
People who take advantage of this crack by investing more money in the long run will end up having a few drinks on their backs. At first you may feel silly for weeks, months, or even years. But in the end they will be grateful. (And they’ll forget, by the way, that they’ve ever felt like fools.)
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People who try to be really smart about it end up doing it worse than people who make it easy and don’t think about it too much. The farther you are from Wall Street, the better. “Silent” money – or, more accurately, simple money – will surpass “smart” money.
Take these comments or leave them as you wish.
This only applies to money you don’t need for five years or more: retirement funds, college funds, and so on.
We’ve had more financial chaos during my quarter century in this business than at any time in recorded history. Of course, the Wall Street crash of 1929-32 was deeper, but we had the bearish market of 2000-3, when stocks fell by half, the global financial crisis of 2008, idem, the crash of the Covid of 2020, when the markets collapsed in a few weeks, and many more. When I started my career, a giant hedge fund had just imploded, causing global markets to collapse. The hedge fund, Long-Term Capital Management, was run by people on Wall Street so supposedly brilliant that some of them had Nobel Prizes (albeit only in economics, which hardly counts).
The cause of the crisis? Oh, Russia. It turns out it was an unstable country with an unstable president. Who knew?
I remember the first knitting accident like, and supposedly the technology was gone for a generation. Then there was September 11 and we will be pursued by perpetual terrorist attacks. No one was going to live in New York anymore, no one was going to build another skyscraper, no one would ever get on a plane.
The financial crisis of 2007-9 was the worst since the 1930s.
In 2009 Dubai had to be rescued by one of its neighbors.
In 2011, U.S. national debt was so high and our political system so dysfunctional that rating companies downgraded Treasury bills for the first time.
From 2011 to 2014 approximately, the European continent suffered such a serious debt crisis that it was fully, positively, 100% guaranteed to break the whole of the European Union and destroy the euro.
In 2016, one country left the European Union: Britain, which had not been part of the debt crisis and did not even have the euro. Brexit was also guaranteed to destroy the European Union.
A few months later, the United States elected a bankrupt casino operator to the presidency, and the country was allegedly doomed.
Two years ago we had a global pandemic compared by some to the Spanish flu.
All this time? Overall, global stocks, as measured by the MSCI World Index, rose 470%. The S&P 500 SPX,
has increased by 560%. And if you bought during the same crises, when prices had already dropped, you did even better.
There is also a confession here. If I had listened less to the clumsy and myself followed this advice more aggressively, I would now be writing this from my yacht.
Are you still tempted to panic?
Since the 1920s, stocks have been overwhelmingly the best investment for long-term savings. The average gain for five years has been 50% above inflation. Average gain in 10 years: 120%. And more than 20 years, 360%.
In fact, only one in four times the market has been unable to keep up with inflation for five years, and only one in eight has failed to exceed 10. Not once has more than 20 failed.
That is why the richest people in the world almost all made their money in stocks and almost all of them keep it there. Warren Buffett has 99% of his personal wealth in stock.
So do the world’s leading pension and sovereign wealth funds. Norway’s giant sovereign wealth fund holds more than 70% of its money in shares at all times. The average private university in the US maintains its endowment 75% invested in shares. (Wealthier Ivy League colleges tend to take even more risks when immersed in private equity: privately owned shares that can’t even be easily sold on the market.) Even more pension funds prudent usually invest more than 50% in stocks.
The math and the story are pretty clear. Anyone over the age of five, and especially over the age of 10, should ignore the panic and be in stock.