Too many investors fear the wrong thing in investing.
They fear something that’s good for them.
Something that could make them a lot of money.
When we tell you what it is you probably won’t believe us, but it’s true.
They actually fear making money.
We’ll explain what we mean…
Since stocks began to soar last November we’ve heard a constant stream of the same message – ‘Don’t buy stocks, the market is about to crash.’
We won’t argue with the reasons behind the message.
In fact we agree with it almost entirely. Stocks will fall…at some point. But it has been almost a year since the rally started.
And despite a few bumps (including one or two big bumps) the Australian stock market is 19.8% higher than it was last November.
Missing Out on Fat Dividend Cheques
So why is it that so many investors fear making money?
The way we see it, many investors get so caught up with thinking about the worst thing that could possibly happen that they become too worried to think about the positives.
The sad thing in the case of the stock market is that many investors have missed out on the potential for double-digit gains, and the accompanying dividend cheques.
So instead they’re still in cash…at what has been an ever-decreasing interest rate.
It’s important to remember the point of investing and what it means. You invest because you want to make money. But investing comes with the risk of losing money too.
The key is to weigh up the odds of making money versus the odds of losing money. If the odds are in favour of making money then you should invest. If the odds are against making money then maybe you shouldn’t invest.
This is what we mean about investors being too scared to make money. Because any way you slice and dice things during that time, the odds were always in favour of investors making rather than losing money.
We’ll Ask You One Question
And we’re not using hindsight here. We’ve said that in one way or another all along.
If you’re new to Money Morning feel free to scan through the archives. You’ll see we’ve consistently said this is a buyer’s market.
There was a simple reason. There was no way on Earth that anyone in charge of fixing interest rates would allow rates to rise and therefore create a negative environment for bond and stock prices.
Yet that didn’t stop many investors from fretting about what would happen when interest rates eventually have to rise. Even though rates may not rise for another two, three or five years.
And if things are really bad interest rates may not go up for another 20 years – see Japan.
Even now, as bad as thinks look in the US, you still have to play the odds. So what are the odds right now?
Well, let’s stop and think about it. We’ll ask you one question…
Do you think US politicians will come to an agreement to prevent a default?
If you answer yes, then that can only be a positive result for the market. In that case you should continue to hold and, if you’re so inclined, buy stocks.
If you answer no, then that can only be a negative result for the market. In that case you should sell your stocks and stay in cash.
But be realistic with your answer. If you answered no, do you honestly believe that any politician will do anything to allow the government to default on its bond payments?
Think about why politicians enter politics. They do it so they can gain office. Trust us, there are very few votes to be won by bringing on a collapse of the US bond market and the US dollar.
Don’t Miss This Chance to Boost Your Wealth
So instead of worrying about what may happen years into the future and letting it impact your investment decisions today, we say that it’s great you understand the long-term fall-out of current policies, but don’t let it cloud your need to invest and make money today.
Because that’s one of the most important things. Even with all the nonsense going on in Washington DC, stocks are still moving. And in most cases they’re moving up.
We’re talking tiny small-cap stocks as well as big blue-chip stocks. We’re talking technology stocks with innovative ideas as well as solid industrial stocks paying a handsome dividend.
But after all we’ve said today, if you don’t believe us, maybe you’ll believe the market. We’ll put it this way. The Australian market hit an intra-day high of 5,314 points on 27 September. The next day the markets panicked as fears spread of a possible US debt default.
Yesterday the Aussie market closed at 5,259.
In other words, for all the talk and fear and panic over the US government potentially defaulting on its debt obligations, the Australian market has lost a grand total of 55 points. That’s just over a 1% fall.
And even if the market falls by another 50 points today, you’re barely looking at more than a 2% drop from the peak.
As we say, take notice of the problems facing the world economy, and build long-term strategies to combat these problems into your investing gameplan.
But whatever you do, don’t let the bad news consume you. Don’t lose focus on the great opportunities that exist in the Aussie market today.
Cheers,
Kris+
From the Port Phillip Publishing Library
Special Report: UNAVOIDABLE: Australia’s First Recession in 22 Years
