One of the most respected business journalists in this country specialises in scaring the pants of his readers, and at times he even rattles me. And because he’s such a professional scribe, his research is first class but his inclination towards the Armageddon scenario means he fails to properly assess the alternative positive possibilities.
I have to confess I could be accused of being this guy’s opposite, being excessively positive. However, in my defence, I can only say that my failure to be negative is purely based on what I see is my prime role in the media nowadays.
You see, if my job was to capture eyes and ears on websites, TV, radio and other media, I’d always be looking for credible reasons to be negative. However, apart from decoding business, economic and political mumbo jumbo manufactured by out-of-touch academics, economists, public servants, and market experts, I see my role more as an educator of those hoping to invest or build wealth wisely and successfully.
However, over the years, big bad scary events such as the September 11 raids on New York and Washington have been used to make readers frightened to invest and the end result has been bad for those who’ve been led astray by catastrophists in the media.
Let’s look at 2023 as a case in point. We had the Ukraine war, record fast interest rate rises, huge inflation rates, the Middle East blow up and China hovering over Taiwan, while Donald Trump looms over the White House again, which would all be reasons for scary media stories and scared investors running for the safety of 5% term deposits.
These of course were safe but with inflation over 5% for most of 2023, a 5% term deposit really had a negative real return.
In contrast, if someone ignored the negative news and remained fully invested in stocks, they would’ve made 24% in the US-based S&P 500 Index, and that’s before dividends!
Meanwhile, here, you made 8% capital gain, 4%+ in dividends and then there are franking credits taking the potential return from not being a scaredy cat to around 14%!
Of course, those numbers show why we advisers put our clients in both local and overseas markets, but both stories show why we can’t afford to get spooked by news stories.
The resounding lessons from the history of stocks are:
- Stock markets rise 7 or 8 years out of 10.
- They rise around 10% a year on average over a decade.
- Half of those returns come from dividends.
- Create a portfolio designed to help you achieve your money goals.
- Buy quality companies when the market excessively beats up on them.
- Be diversified as it reduces the likelihood of big losses and leaves you exposed to good returns over time.
- Don’t get distracted by short-term scary stories — they can be wealth hazards.
One final point — I was minorly spooked by an economist who saw terrible times for China ahead, but then Chinese data came out that told a different story.
This made me understand how novices to investing could have been negatively affected and it prompted me to warn about the dangers of believing what you read by those paid to attract eyes and ears, rather than educate.
