At the moment I’m sitting on a huge pile of funds invested in some ultra-low risk assets. Given my age, low level of expenditure, high amount of income, and long term investment duration, it needs to be invested in something that can earn better returns.
Being a millennial who lived through the lost decade but never seen the perils of long sustained bull run like the 80s and 90s, and a generally risk adverse individual, nothing looks good to invest in. The US Market is too price with a Cape Ratio of 26+. There are other markets that are cheap, but the global economy is not doing well so maybe they are undervalued for a reason. Emerging markets is on a little hot streak up 23% in the last 6 months, and has forecasted 50% returns coming, but see my last thought on the global economy. Everything just seems like a terrible investment and waiting for good opportunity to arise seems to be the solution.
But when is the opportunity right? For the SP 500 it must’ve been right in 2011. Had you invested $10,000 is in the SP500 in 2011, it would’ve grown to $19,309.44 today 68 months later (holy shit 2011 was that long ago). That’s a nice 12.68% CAGR. Certainly most people knew it was the right time. Lets see what they thought back then.
On 1/5/2011 a blogger made a post marking the predictions of some stock market gurus. They were rather grim for what we now know to be a rather bright period for US equities. Anyone who is human might be concerned that then was a bad time to invest
Biryini S&P500 to 2854 by 2013 (gain of 124% or 31% annualized)
Pretcher stocks (he said Dow down 90%) so S&P500 to 128 by 2017 (loss of 90% or -28% annualized)
Shiller S&P500 to 1430 by 2020 (gain of 12% or 1% annualized)
2013 came and went. Biryini never arrived. Pretcher probably won’t make it to the party either with his predictions time line coming in 5 months. And Schiller, well who knows, but it Is likely that he’ll be wrong too.
The reality is at any point there is always 101+ reasons why now is not a good time to invest.
- The debt is too high
- Interest rates are negative, things will collapse
- Developed market population is declining
- The bull run has been too long
- Interest rates are going to rise
- You can’t invest in risk factor or quant strategies because they are going to suffer from arbitrage
- Everyone is investing passively so that will also suffer from arbitrate
But if you sit around waiting for the right time, it might never come. 1965 – 1975 was a horrible time for US equities. It was a lost decade, filled with ups and downs that resulted in basically no gains, eerily similar to the 2000-2009 period.
Had I witnessed the 1965 – 1975 period first hand and started considering investing around 1980, after a nice recovery, I would probably be timid to invest and filled with fear that the next 10 years will be even worse than before. I’m sure stock market pundits were filled with the same rhetoric then as they are now. To everyone’s surprise though, the next 20 years were and un-paralled bull market. If you listened to the fear mongering you would’ve missed out on amazing wealth building returns. With that in mind, there is no time like the present to invest.