Andrew Hallam
21.10.2019

For Most Investors, 2019 Is Turning Out To Be A Really Bad Year
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The year isn’t over. But U.S. stocks are up a lot. They soared more than 17 percent over the first nine months. Global stocks are up about 14 percent. Most investors, however, should be disappointed.

If you’re retired today, stop reading now. You’re not going to like this column. But keep reading if you’re younger. If you’re at least five years from retiring, you should hope to see stocks fall.

I know. This might not jibe with how you feel. Nor does it jibe with what you might see in the news. When stocks rise, headlines say, “Investors Win As Stocks Rise Again.” And when markets fall they’ll say, “Investors Lose As Stocks Pull Back.” But such headlines aren’t fair. It’s much like saying, “The World Celebrates As France Wins The World Cup.”

Some people were happy to see France win football’s World Cup this year. But the other teams have fans as well. Not everyone cheers for France. That same rule should apply to the stock market too.

About 15 percent of adults should hope to see stocks rise. After all, this is roughly the population over the age of sixty-five. Most of these people are retired. They’re living off pensions and the proceeds of their investments. In other words, they’re selling parts of their portfolios to cover the cost of living.

Unfortunately, headlines cater to this relatively small percentage. They ignore roughly 66 percent of the population between 15 and 64 years of age. Most of these people are working. In other words, they should be buying stock market assets. But business headlines push too many people to cheer for the wrong team.

Let me explain: Buyers and sellers are on different sides of every deal. Assume that you want to buy a coffee cup from me. It has a lovely little image of a bull and a bear butting heads. You bought a cup from me last week. I charged you $10. This week, however, I’m asking for $12. If you buy it, I should be happy. After all, I’m the seller. I would get a higher price than I did last week. But that shouldn’t make you happy. After all, you aren’t the one who’s selling. You’re buying the coffee cup instead.

This premise is simple. It also applies to stocks. If you’re retired, and selling, you should be happy to see stocks rise. If you’re working, and buying, rising prices shouldn’t make you smile.

I’ve been investing in the stock market for 30 years. I started to invest when I was just 19. This has given me plenty of time to compound my money. But I’m just 49 years old. I’m still earning an income, so I’m adding money to the markets. If my portfolio dropped by $500,000 over the next few months, I would be thrilled. Over the past 30 years, I have been reinvesting the dividends in my portfolio. When stocks fall, those dividends buy a greater number of shares. If stocks stayed low, it would be much like loading coins on an ancient catapult. The more money I can shovel onto that catapult when it’s low, the more money I’ll make when it decides to spring up.

This doesn’t mean you should wait for stocks to drop before investing. Over my lifetime (49 years so far) U.S. stocks have hit all-time calendar year highs 33 times. Long-term, stocks go up two out of every three years. Even during recessions, stocks almost always rise.

But there’s no market pattern. Stocks might rise several years in a row. They might then fall or flat-line for a handful of years.

Instead of trying to time the market, investors should add the same amount of money every month. By doing so, they’ll buy more units when stocks fall and fewer units when stocks rise. If they have a lump sum, they should invest it all right away.

No, I’m not waiting for stocks to crash. I add to my portfolio every month. And when the markets fall, I’ll be dancing in the streets. Don’t think I’m crazy. If you aren’t retired, smile and join me instead.

 

Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas

Swissquote Bank Europe S.A. accepts no responsibility for the content of this report and makes no warranty as to its accuracy of completeness. This report is not intended to be financial advice, or a recommendation for any investment or investment strategy. The information is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Opinions expressed are those of the author, not Swissquote Bank Europe and Swissquote Bank Europe accepts no liability for any loss caused by the use of this information. This report contains information produced by a third party that has been remunerated by Swissquote Bank Europe.

Please note the value of investments can go down as well as up, and you may not get back all the money that you invest. Past performance is no guarantee of future results.


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