Don’t buy a single share until you’ve read this

Are you doomed to lose your shirt on the stock market?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The world is in trouble. BIG trouble. ‘Dr Doom’ Marc Faber, ‘maverick’ investor Jim Rogers and ‘rogue’ economist James Dale Davidson are just three of the more prominent voices in an off-Broadway chorus singing of calamity. The most pessimistic see a stock market crash as both inevitable and imminent. And they reckon it’ll be the mother of all meltdowns.

All point to the same root cause. The policies of low interest rates and quantitative easing (‘printing money’) that have been pursued since the 2008 financial crisis. This, they say, was mere financial alchemy — and it hasn’t worked. We’re living in an Alice-in-Wonderland world. Buoyant stock markets are an illusion. Debt is out of control, economic growth is faltering, myriad indicators are flashing red, and more financial crack cocaine from central banks isn’t going to prevent a collapse.

Uncharted waters

As an archetypal reserved Englishman, I have a natural aversion to histrionic messages of doom. Nevertheless, I find some of the bearish analysis compelling, and supported to a degree by more congenial, measured voices, such as that emanating from the staid office of 27 St James’s Place, London.

In the latest half-year results from RIT Capital Partners, chairman and veteran financier Lord Rothschild observed: “The six months under review have seen central bankers continuing what is surely the greatest experiment in monetary policy in the history of the world. We are therefore in uncharted waters and it is impossible to predict the unintended consequences of very low interest rates, with some 30% of global government debt at negative yields, combined with quantitative easing on a massive scale”.

Lord Rothschild has previously bemoaned the difficulties of allocating capital effectively in a world so distorted by monetary policy, and has said that the search for value “has become increasingly challenging. Almost every asset class is highly priced by historical standards …”

A rational way forward

It would be foolish to pretend that the world economy isn’t threatened by low growth and deflation, that we aren’t in uncharted waters with monetary policy and that a stock market crash isn’t a risk. However, over long time periods the stock market tends to favour optimists and frustrate pessimists. Furthermore, it can severely punish those who switch back and forth and get their timing wrong.

Here at the Motley Fool we believe that investing is a long-term business, and that for most investors ‘time-in’ the market, rather than ‘timing’ it is the best strategy. Sure, we may hold back some cash when company valuations are particularly high, and invest as much as we can when markets crash (as they invariably do from time to time), but building up our long-term wealth through good times and bad is the primary objective.

In this respect, our Foolish philosophy is aligned with that of renowned fund manager Neil Woodford. Woodford recently gave us his take on the market: “It is difficult to argue that the equity asset class is cheap any more, but there are still some tremendously attractive investment opportunities within it and my strategy is focused on pursuing these.”

Like Woodford, we at the Motley Fool believe that although uncertainty about global economic growth and monetary policies abounds, maintaining a long-term perspective and a disciplined focus on identifying sound businesses at attractive valuations is an eminently rational way forward.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »