Is It Too Late For Me To Invest?

Credits to Dr Wealth

And if you’ve been looking at the recent market rally, wondering whether you’ve already missed the boat and if it is too late for you to get in right now, here’s something I’ve learnt over the years:

You will always wish you invested earlier. It is never too late to start.

What you think is high now…can actually go even higher.

I like this chart that was shared by EndowUs during one of their webinars, where they talked about the potential returns of “the world’s worst investor” – an ill-fated figure who invests $100,000 exactly at the peak prior to every market crash.

And yet, even for this unfortunate (imaginary) investor, his portfolio would have done pretty well despite having to go through all those market crashes.

It is a good illustration of the concept that time in the markets is more important than timing the markets.

Moreover, even if you had started investing during the crisis, there’s no guarantee that your portfolio wouldn’t have been hammered as well. If you simply rewind to a few months ago, no one knew (or could say) with absolute certainty that the stock market was going to bottom in March.

And if you had invested at the start of the crisis in February, some of your positions might still be underwater – whether or not you had picked individual stocks or simply invested in broader indexes. As of today, neither the S&P 500 nor the STI Index has recovered to its pre-crisis highs during February.

You might be wishing that you had entered then, but let’s be real – would you have held on to your investments as you watched your portfolio tank? Or would you have panicked and sold off your positions to “cut loss” instead, while waiting for a better time to re-enter?

Is this a real recovery?

I don’t know if the market is on its road to recovery now. For all we know, there might be another crash again. Some countries are already seeing a second wave of covid-19 cases, the political turmoil between the US and China is becoming more intense, some businesses that closed down during the last few months may never reopen…

The truth is, none of us know what will happen next.

So instead of spending my time trying to predict and guess where the stock market is going to go next, I’d rather spend my time focusing on identifying quality businesses and their valuations instead.

I’ve learnt over the years that the markets will never be without its challenges. At every point in history, there always seems to be a reason NOT to invest – be it crashing oil prices, political turmoil, trade wars, currency depreciations, etc.

But stock markets have only trended higher over time. And so have the stock prices of fantastic businesses.

As an individual investor, I harbour no illusions that I know or can predict how macro factors can play out or influence the stock market in the near term. I can only guess.

And despite all the macro headwinds in the last decade, the stock market has only continued on with a sustained bull run as it climbed higher and higher.

So don’t worry so much about trying to “catch the bottom”. Spend your time focusing on studying individual businesses instead.