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Halloween Horror Story: The Man Who Was Too Afraid To Invest

We all know the scariest stories are true stories, so gather ’round kiddies as I tell a tale of investing horror that will haunt your dreams and send shivers through your portfolio.

Joe is an ordinary soul. He works hard for his money, and whatever is left over at the end of the month he wants to put to good use. But, more importantly to his mind, he doesn’t want to lose any of it. Not a single penny.

Joe is a big fan of savings accounts, and has made good use of cash ISAs, index-linked savings certificates and fixed-term bonds over the years.

But when it comes to the stock market, he always found a reason not to invest.  It might be a war, oil prices, house prices, debt ceilings, bail outs, bail ins, too much QE, or an upcoming election. There’s always something to worry about.

He watched in the 1990s as the FTSE 100 (FTSEINDICES: ^FTSE) hit 3,000, 4,000, 5,000 and then 6,000, seemingly making new highs nearly every day as the decade drew to a close. I can’t invest after the market has gone up so much, he said to himself.

A few years later, he counted his blessings as the FTSE 100 index fell from its all-time high of 6,930 to 3,289 in a little over three years. He was tempted at times as this bear market growled away. But what if it falls further he thought? However, if it gets 10% cheaper from here, then I’ll buy.

When the turnaround came, he was still reluctant to take the plunge. The market has risen too far, too fast he said. When it pulls back another 10%, then I’ll invest.

Like most folks, he was scared stiff by the events of 2007 and 2008. Suddenly, even his rock-solid savings accounts seemed vulnerable. As the stock market plunged again, his interest in shares was piqued once more. Another 10% drop, he said, then I’ll buy in.

When the FTSE 100 rebounded in early 2009, he was caught on the hop. It’ll never last, said Joe. But you know what, if it falls back 10% from here, then I might buy in. The FTSE 100 crossed 4,000, 5,000, and then 6,000, all in pretty quick succession.

Now here we are at Halloween 2013. Although the UK market is yet to reach the high it hit in 1999, with reinvested dividends and regular investment, many Foolish types have made very respectable returns from shares over the last 20 years or so. You may well be one of them.

Joe, who may or may not be a figment of my imagination, currently gets 0.5% on most of his savings (which is then taxed, of course), and is no nearer to making his first stock market investment. His cash has just about kept pace with inflation over the years, but even that has become a struggle now. He’s started to get really worried about his retirement, and the lack of funds he has for it. Please don’t be Joe.

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