With our current headlines of geopolitical issues, China trade wars, viruses, there’s always a reason to get out of the market. There will always be “scary” headlines. However, it’s important to realize that you have to do something with your money.
If you decide that you don’t want to participate in owning stocks in these great companies out in the world, then your alternatives are bonds or cash. Bond yields are very low these days, and internationally, a lot of them have negative yields. So investing means you get less back. Cash is a lower yield, too. So when people say the market’s too high — too high relative to what? And when you factor inflation into the equation, cash and bonds these days often produce negative “real”(after inflation) returns. So while cash and bonds are good components of a well diversified portfolio, they usually shouldn’t be 100% of one’s portfolio.
The headlines often bring attention to reasons why you shouldn’t be invested, but keep in mind: cash and bonds have their own risks too. Even if you have corporate bonds, it’s been shown that there’s default risk — so while you think you might be getting a steady stream of income, there’s a risk of losing your money through defaults.
Lastly, over time it’s been shown that corporate bonds and long-term bonds rates returns have been very similar to U.S. long-term bonds. Also consider that when you sell a stock, someone else buys it immediately. There are no orphaned stocks out there. Whenever a stock is sold, there is an eager buyer who bought it on the other end thinking that it was a “ good buy”.
If your investment strategy is smart and based on a calculated scientific approach, it doesn’t feel like gambling. What we deliver is a globally diversified, calculated investment return that has rewarded investors very well.
Jeff Holland | VIAIV