There are no no-brainers in investing

The lesson of history is not that every decade you get a ‘no-brainer’ chance to dust down your Warren Buffett quotes and pile into shares.

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Do you remember how on 20 March 2020 – as fear about a deadly new virus crystallised into the the reality of lockdowns and sent stock markets to new lows – you transferred all your spare cash to your online broker and filled your boots with cheap shares?

What’s that? You didn’t manage it?

Okay, a once-in-a-century global pandemic is pretty terrifying I concede.

How about 13 March 2009?

As the financial crisis raged over the prior 18 months, you’d hoarded cash. You even split your savings across multiple institutions. The run on the banks in 2007 was still fresh in your mind.

But now you saw the opportunity! You waded into the stock market to buy shares at historic lows.

You waded, right?

No? Not so much?

Hmm, well I suppose being confronted by the potential collapse of the financial system had put the willies up everyone. You’re excused a little caution.

Surely, though, the old hands among us were by then sitting on fat gains we’d made from diving into the stock market at the depths of October 2002?

Nearly three years on from the bursting of the Dotcom bubble and with the drums of war beating in the wake of the September 11 attacks, we saw through the gloom.

Now was time to buy those reviled tech stocks and get rich.

We all bought Nasdaq index trackers and multiplied our money ten-fold over the next two decades.

I’m sorry, what was that?

You say you didn’t you get the memo?

Hello? Is anybody still there?

We’re all not all-in together

Don’t beat yourself up if you failed to spot these historic buying opportunities at the time.

You’re in good company.

Great company I would say – because I didn’t quadruple down on equities either.

True, I bought some shares around the Covid lows of March 2020 – but only because it’s my habit to average into market declines throughout to try to pick up long-term bargains.

I’d have been buying shares in the weeks before too. Only to see them fall further.

But I never bank on capturing the bottom. A good thing too because I never do, except by luck.

It was the same story for me in March 2009, and for the vast majority of other sensible investors.

Yes we may have bought shares on the day the bear market was finally vanquished.

But for 99.9% of people, that will have been either as a consequence of their everyday share trading – or perhaps because an automatic monthly investment plan had gone through.

A tiny handful of active speculators may have timed the very bottom to perfection.

But I would bet my hard-won savings that they haven’t done it twice.

Below the belt

The reality is what seems a mere downtick on a long-term graph of share prices from a safe distance of two years – or 20 years – can feel miserable at the time.

They say nobody rings a bell at the bottom of a market.

And in my experience if they do it’s more likely to be a fire alarm or some other warning signal.

This matters not just because you shouldn’t set unrealistic standards for yourself as an investor.

It’s also because you should take the hindsight accounts of market historians with a pinch of salt.

Pundits – myself included – can’t resist talking about how this index or that share returned so many hundred percentage points from a low it that it put in way back whenever.

But in truth very few investors bought that low. The exact reason that shares plumb such depths is precisely because there are few buyers at the bottom.

Yet we all fall for these narratives. And so they end up becoming received truths.

The good old bad days

As someone who makes a living writing about the stock market, I’ve seen this many times.

The bull market of the 2010s offers a fairytale of an example.

As the world emerged from the Great Financial Crisis of 2007 to 2009, very few commentators had any confidence that equities would deliver solid returns for the foreseeable future.

Fund managers were gloomy. Many ordinary folk were looking to cash and gold – if not shotguns and baked beans – as the best place to park their cash.

Markets rose but these were labelled sucker’s rallies. Regulators even revised down the expected returns that pension funds should employ in their projections.

Times looked tough.

The Millennial generation of young adults duly shook their fists at those who’d come before and been lucky enough to enjoy equities soaring throughout the 1980s and 1990s.

That would never happen again. Millennial investors would be mired in poverty thanks to markets that went nowhere.

However, we all know it didn’t pan out that way.

Global markets climbed almost relentlessly between 2010 and 2020.

So much so that by the end of the decade it was an even-newer rank of young adults – Generation Z – who raged against the good luck of previous generations.

Boomers, Generation X, and even the Millennials had it easy.

But now Generation Z was screwed.

Sale on. Everything must go!

Certainly it’s been a rocky start for young investors. Global markets crashed in 2020, then soared to frothy heights, and then burst again as central banks finally began to raise interest rates.

UK investors are dealing with an especially feverish outlook.

A new government has rattled the markets. The Bank of England has been buying gilts to ward off what even it officially dubs a potential ‘fire sale’ caused by over-leveraged pension funds.

Oh, and there’s the threat of nuclear war.

It feels like a terrible time to invest. Shares rise, only to fall further. Pretty much every asset has been dinged in 2022. I open my broker account with a sense of dread.

Does this sense of universal pessimism mean shares are bound to rally from here?

Will a future me be pointing to this as the inevitable day the market turned?

I wish it were that simple.

First, last, and always

The lesson of history is not that every decade you get a ‘no-brainer’ chance to dust down your Warren Buffett quotes, pile into shares, and then see your net worth rocket while you pop Pringles and whistle “we’re in the money” to yourself.

Rather, history shows that every decade or so the wheels seem to be coming off.

Why are you throwing good money after bad? You’re getting poorer every day. The outlook seems terrible.

But at some point – you never know when – all that uncertainty is finally baked into prices.

The news continues to be bad.

But strangely, your short-term returns start to look good.

You fear it won’t last. You don’t want to jinx it! You wonder if the doomsayers who protest it’s all a mirage will be proved right yet again.

It’s only a few years later that you can look back and see that it really was the opportunity. The fill-your-boots chance that nobody could know with certainty at the time.

See you on the other side

Don’t base your investing strategy around timing stock market lows.

Build your plans around being a sensible investor for a long time. Through thick and thin.

Yes, you’ll suffer when the market plummets. But you’ll be invested every time it turns higher, too.

You won’t bail, and when it’s all averaged out you should find you’ve captured the long-term return that equities have historically delivered.

No, that’s not no-brainer share trading.

But it is intelligent investing.

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.

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