Investing is, at the best of times, an uncertain activity. As people are fully aware that the value of investments can fall as well as rise, it is often a great worry when considering making an investment. Clearly we all wish to avoid the possibility of loss wherever possible.

We are living at present in a time of great uncertainty. The largest war in Europe for over 80 years is being waged with far-reaching consequences. Inflation is rampant around the world.
The pandemic may rear its ugly head again. Given these uncertainties, and many others, it may appear illogical to invest money for the future. However, cast your mind back 25 years. The Dow Jones index broke through 7000 for the first time*. Princess Diana died in a car crash in Paris. Y2K worries were on the horizon.

Would you have invested money knowing then that the following events were going to happen?

• 9/11

• the tech market crash

• the global financial crisis

• global pandemic

Quite possibly knowing what was to come (I’ve shortened the list for this article!) you might not have invested, which would have proven to be a bad decision. From January 1997 to December 2021 the US stock market returned, on average, 9.8% a year.

These returns aren’t actually out of the ordinary. They are very much in line with what returns have been throughout the history of the stock market. There have been some incredible innovations over the past 25 years. Our life is quite different now in the way we work, the way we communicate and indeed the way we live.

Investing is always uncertain. It never goes away – if it did there wouldn’t be a stock market!
It is precisely because of this uncertainty that there is generally a positive premium when investing in shares as opposed to relatively risk-free assets. By investing in the stock market you’re not aiming to find out whether this share or the other will do better. You’re actually betting on human ingenuity to solve different problems.

In the immortal words of Corporal Jones, ‘don’t panic’. Invest for the long-term.

*The Dow Jones now stands at over 32,000.

July 2022