What You Are Investing In

Every day I feel humbled when I hear how companies are responding to the Coronavirus. There are so many feel-good stories about how distilleries have shifted to produce hand sanitizer, how companies such as Apple have donated millions of medical masks to healthcare workers. There are also stories about how innovative companies are devising ways to test for the Coronavirus faster, and how there are thousands of scientists and hundreds of companies all over the world working day and night on a vaccine and treatments.

The lesson is that we should remember that we will prevail. It’s not a question of if, but when. We also know the models predict that we probably have not seen the worst of this virus yet. We should all expect things to get worse, before they get better.

I wrote an article in Forbes almost exactly two years ago today. The article was titled, What You’re Really Investing in When You Invest in the Stock Market. Here’s the gist of that article: this is a terrible time to be an investor – that’s what a client had told me then. He continued with half a dozen reasons why it was not a good time to be invested in the stock market. Here’s the thing, none of the reasons he listed were farfetched or even unrealistic. There were no conspiracy theories or worries about nuclear war or currency devaluation or government overthrow. Nope. The truth is, every single one of his reasons were well thought out, rational and factual. They were realistic and also had merit, from valuation concerns, to political turmoil, to the risk of trade wars and real wars. After patiently listening, I replied that despite all of the bad, this was still a good time to be an investor.

If you look back over the course of the last 50 years, we’ve had wars, terrorist attacks, double digit inflation, trade wars, impeachments, poor economic and tax policy, geopolitical instability, crushing recessions, high unemployment, and at times, chaos and uncertainty. Yet, despite all of this, the market has continued to go up. But why? It’s because each of these calamities is temporary. Bad leaders? Temporary. Wars? Temporary. High unemployment? Temporary. Almost everything that worries us day-to-day is temporary. Yes, even the Coronavirus is temporary.

What’s not temporary is the need to create, the hunger to improve one’s life and the desire to increase one’s financial standing. These are not fads or ephemeral wishes. These are core needs that drive Americans and people all over the world. 

As an investor, you are investing in human potential and the unflinching and persistent strive for advancement. When you invest in the stock market, you are investing in companies, but more importantly, you are investing in the belief that people want to wake up every day and create new products and services that solve problems and make lives better. Recessions may come and go. Pandemics may come and go. Leaders may come and go. Even industries and companies may come and go. But the machine of progress continues, even in the face of setbacks, hurdles and disasters.

This doesn’t mean that there won’t be events that upend the stock market. Remember, I wrote this two years ago. Some of these will be known and others will take us by surprise, like what we’re going through today. In the short term, the market reacts to each of these events, but as long term investors, they are meaningless. Let me repeat that: In the short term, the market reacts to these events, but if you are a long term investor, it is meaningless. Think about it.

If you’re a 30-year-old investor, whatever happens today, this week, this quarter or even this year in the stock market is just noise. Even if you’re approaching or in retirement, it is irrelevant, simply because you’ll be alive for several more decades, and as a result, you’ll be an investor for several more decades. What happens in 2020 is just going to be a blip on the chart. Being a successful investor is about being able to distinguish between what is important and what is not. I can assure you, a company’s earnings in the last quarter (or maybe more appropriately), in the next quarter is irrelevant when you are investing for decades.

If history is any lesson, no matter what looks negative today is temporary. The recession will end, eventually. Unemployment will eventually come down. The new tax laws, reforms, legislation, tariffs, viruses will inevitably change; however, what remains is the human spirit to grow and create. That is enduring and that is worth investing in.

If you have any questions about the markets or retirements, please, let me know at askdoctorrobert.com. I’m happy to do my best to listen and address each of your questions.

Until next time, be safe, and I’ll talk to you soon.