I’d pay a lot of money for a crystal ball.
To know which shares to buy, what horses to back… and when I was about to get stuck talking to the most boring bloke in the world at a dinner party.
Alas, I don’t have one.
I guess I’ll have to make do with horoscopes and palm reading instead.
No, not really. I’m kidding.
But gee it’d be nice to believe in that stuff, wouldn’t it? To have a think that the future is knowable, and that uncertainty can be put to one side.
Which, if you think about it, is exactly why people pay to visit clairvoyants, tarot readers and the rest… the human desire, to know what happens next, is just incredibly strong.
Instead, my mother was right when she used to sing Doris Day’s Que Sera Sera to my sister and I as kids.
Try as we might to peer into the future, ‘… whatever will be, will be’.
Now, before you think I’ve resorted to the dartboard for my stock picking, I’m not saying that a little careful analysis and judgement can’t put the odds in our favour. I absolutely believe that they can.
But that’s different to knowing the future.
Right now, as you almost certainly know, the ASX is flirting with all-time highs. Never, in the history of the Australian stock market, have our companies been worth this much.
Which, when you stop to think about it, is really something.
The last time Australia’s listed companies were worth almost this much was waaay back in 2007, before the acronym ‘GFC’ was burned into our brains — and our psyches.
(Remember, though, that many, many millions of dollars in dividends have been paid out in the interim, meaning Australian investors hit a new peak quite a few years back, in ‘total return’ terms.)
Human nature being what it is, record highs tend to produce two distinct, opposite responses in people.
The first group are excited by the recent gains — in sales, profit and share prices — and can only see more blue sky ahead.
The second group see recent gains and, having been burned before, can’t help but feel new highs just take us ever closer to the next collapse.
Same market. Same companies. Same share prices.
But very different perspectives.
If we call them the optimists and the pessimists, respectively, is there room for a third group… the realists?
I think so, and I count myself in their number.
I am — as I have written a hundred times — a dyed-in-the-wool long term optimist when it comes to the future of our listed companies.
I have, quite literally, all of human history on my side. Humans are innately restless, creative and innovative. We see and solve problems. We create new products and new industries. We dream big and achieve big.
New products, improved productivity and growing populations are what have — and will — drive our prosperity. And, for all of modern history, the companies on our stock markets are (on average) the cream of that crop.
I also know that markets are volatile. They rise and fall. Ebb and flow. Bump and swerve.
Being a stock market historian is easy — you can see exactly where you should have bought and sold.
Looking forward? That’s a little (okay, a lot) tougher.
In 2007, many people were rushing to join the party.
In 2009, many people were running frantically for the exits.
And then there’s the stuff that didn’t happen.
Those confidently predicting a double-dip recession in 2010.
Those who said ‘Sell Everything’ in 2016.
And, yes, the group who believed that ‘Buffett’s Lost It’ in 1999.
As a long term optimist, I’m actually happiest — at least in terms of my level of confidence — when others are worried or panicking.
I was buying during the GFC, because there was little doubt the Chicken Littles were (to mix my metaphors) throwing out the baby with the bathwater.
But that doesn’t mean the only time to buy is just after a crash.
Prices are still fluctuating around that record level, but, as a general statement, it’s impossible to have ever bought and held ‘the market’ and to have lost money. That’s the reality of new highs.
Moreover, if you’d sold — or not invested at all — over the last 10 years, while you waited for the next crash, you’ve missed out big time.
Because, going back to our historians, we only know what the ‘peaks’ were, once we’ve seen the subsequent valleys.
Yes, 2007 was our previous high, and anyone who liquidated their portfolio at the top got very, very lucky.
But you know what?
2006 was an all-time high, too. And 2005. And 2004.
In other words, if you’d been freaked out by all-time-highs, you could have sold out more than three years before the GFC hit.
And if you had? Well, you’d actually have — and I checked this, three times — less money than at the very worst point of the GFC-induced market slump.
Yep, you would have been better off actually living through — and being invested through — the GFC, than selling out too early.
And the kicker? That doesn’t even include dividends, which tips the balance even further in favour of the ‘hold your nose and plough on’ brigade.
Are we in the equivalent of 2001? 2003? 2007? I have no idea. Nor does anyone else.
(Oh, they’ll all claim to have known, in hindsight. That’s the way this game works. But it’s rubbish.)
What I do know is that staying invested is, on average, the best strategy. historically speaking.
And, when the future is inherently unknowable, doesn’t it just make sense to stick with the strategy that historically has the highest probability of success?
(Even better is if you’re able to save and regularly add more to your investment account, meaning you get the super valuable benefit of dollar cost averaging!)
I can’t change your biology. I can’t really change your psychology, either, unless you’re willing to let me.
If you’re the sort of person who wants to avoid losses at all costs, that’s up to you. But you might just end up selling in 2003, being ‘right’ about the market, and still ending up worse off, anyway.
Me? I’ll take the occasional loss, sometimes from all-time highs, if I also get to enjoy the overall gains that come despite — not in the absence of — such losses.
We all want to be right. But in investing, be careful what you wish for…
With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.
Hint: These are 3 shares you’ve probably never come across before.
They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”
We think these 3 shares offer solid growth prospects over the next 12 months. The first two currently offer fat, fully franked yields. The last is a surprising REIT offering you the benefits of being a landlord with none of the hassle! You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."
Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!
The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.
Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.