When it comes to stock market investing there is no question that you need a “no pain, no gain” mindset in order to benefit from investing in stocks. You also need great patience over many years. Of course such character traits are rare in human beings because most people do not have multi-year, sometimes multi-decade, patience and most people avoid pain. I once told a colleague I had a “no pain, no gain” philosophy of life and he wittily retorted that his philosophy was one of “no pain, no pain.” His view is of course the prevailing one amongst human beings and understandably so.
Americans are more afraid of investing in the stock market than they are of losing their jobs, public speaking or even dying. A new survey by Harris Interactive found that the only provided option more frightening than equity investment is sky diving.
According to the “Fear of Financial Planning” survey, of the 783 potential investors surveyed, 62% are scared of investing in the stock market, while 58% fear death, 57% fear public speaking and 37% fear losing their jobs https://www.wealthprofessional.ca/news/industry-news/equities-are-scarier-than-death/174641
I find it astonishing that investing in shares is more feared than death itself.
Interestingly if you were to invest in shares for 20 years or more your odds of gains increase to 100%.
Equally, the likelihood of you experiencing a bear market (a fall of more than 20% in the stock market) increases to 100% if you are invested in shares for 15 years or more.
According to a survey by Curvo the annual return of the S&P 500 Index over the last 20 years has been 11% and the total return 709.6% https://curvo.eu/backtest/en/market-index/sp-500?currency=eur
These are truly extraordinary numbers don’t you agree?
So what these above bar charts prove is that stock market investing is a “no pain, no gain” strategy and one that requires great, long term patience.
The average holding period for US stocks has significantly decreased, with data suggesting it’s now around 10 months. This is a notable drop from the 5 years observed in the mid-1970s. While some investors, like Warren Buffett, advocate for long-term holding strategies, the trend indicates a shift towards shorter-term trading among many investors.
Admittedly, Warren Buffett is from an older generation; he is now 94, but he is a great example to investors. One of his famous sayings is “Be fearful when others are greedy and be greedy when others are fearful.” So in other words, buy when there has been a stock market correction or a crash. Don’t be fearful and sell. Think of such an occasion as being like the New Year sales or a Black Friday event. It’s a great time to buy at highly discounted prices. So, make this your mantra to buy whenever there is a “sale.” “The time to buy is when blood is running in the streets,” said Nathan Rothschild, who, in 1815, amassed one of the largest trading fortunes ever recorded. You know it makes sense.*
Tony Byrne, Managing Director
If you want to learn more about this topic, please find the link here.
More information about our fund can be found here: Hargreaves Lansdown or AJ Bell
*Risk warnings
The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.
