Dave Kennon, Kennon Financial
The world seems extra uncertain and crazy right now, doesn’t it?
1. Government shutdowns
2. Stock market volatility
3. Incredible political divisiveness
4. Terrorism, both domestic and global
This stuff is downright scary.
How could you not be thinking to yourself, “This is a bad time to invest. I had better wait until things cool down.”?
I can’t blame you for having those thoughts, but allow me to gently plant a seed: This way of thinking could devastate your long-term financial well-being.
So this week I want to give you some perspective. Let’s all jump into my time machine. Get ready to be zapped back to early in the 20th century.
<machine noises whirling and buzzing>
1. The year is 1941. Hitler is marching across Europe. The war is clearly working in his favor. The reality of World War II can be seen on every American’s face. News just hit that Pearl Harbor has been bombed by the Japanese. Boys are going to war.
American citizens are very realistically thinking to themselves, “THIS time is different. The stock market could collapse and never recover. Heck, there may not even BE a stock market in a few years. We may all be speaking German.”
If you invested $100,000 in 1941, ten years later it’s worth $483,014.
2. The year is 1951. Harry Truman orders the development of the hydrogen bomb. Russian expansionism has become a giant concern. The Korean War begins when North Korean Communist forces invade South Korea.
Why in the heck would you invest your money at this time in history?! A new “red” menace has appeared from the wreckage of WWII. The world is an uncertain and scary place.
If you invested $100,000 in 1951, ten years later it’s worth $446,944.
3. The year is 1962. The Cold War begins to really heat up. The USSR has plans to build missile bases in Cuba capable of launching nuclear warheads. As a side note, the Russians had, the year before successfully tested a 50-megaton hydrogen bomb.
The American populace is gripped with fear. Schools run nuclear attack drills for students. The possibility of a new World War is staring us in the face.
You would have to be completely nuts to invest your money facing such uncertainty. The possibility of worldwide nuclear Armageddon would get any investor a bit nervous.
If you invested $100,000 in 1962, ten years later it’s worth $257,778.
4. The year is 1974. The Watergate scandal has rocked the country, leading to the resignation of Richard Nixon. The Arab oil embargo, which had begun the year before, has a deep effect on the economy. Unemployment reaches historic highs. Cars line up for miles at the gas pumps. The society: economically, politically, and socially, is experiencing some of the worst struggles since the Great Depression.
Investing your hard earned savings at this point in history is a comical idea. The economy is in shambles with no relief in sight.
If you invested $100,000 in 1974, ten years later it’s worth $397,874.
5. The year is 1991. Saddam Hussein invades Kuwait. A new Middle-Eastern menace has appeared on the scene. George Bush initiates Operation Desert Storm. Racial tensions explode in Los Angeles following the Rodney King verdict.
What a crazy time to be alive! For the first time, the news stations report on the war in real-time; broadcasting frightening images of bombs exploding and tracers filling the air from anti-aircraft guns. Investing during such upheaval would be nothing short of irresponsible.
If you invested $100,000 in 1991, ten years later it’s worth $337,272.
6. The year is 2003. The September 11th attacks have radically changed the way Americans view the world. The USA PATRIOT Act and Department of Homeland Security come into being. Hundreds of thousands of troops are called up. The U.S. invades Iraq. The threat of radical Islamic terrorism seemingly comes from nowhere. Tension fills the hearts and minds of the American public.
Why would anyone invest their savings amid such uncertainty?
If you invested $100,000 in 2003, ten years later it’s worth $204,207.
7. The year is 2008. The housing market plunges. Banks are hit hard, most of them slashing dividends to near zero. Well, respected institutions such as Lehman Brothers, Washington Mutual, and Countrywide go bankrupt. The stock market goes into free-fall. The “Great Recession” is upon us.
If you invested $100,000 at the end of 2007 (before the stock market crash), ten years later it’s worth $225,863.
I think you get the point. The phrase “This is a bad time to invest my money” can have dramatic consequences. The world will always seem unstable. Don’t let it derail your financial independence.
Dave Kennon, Kennon Financial
There is no certainty that any investment strategy will be profitable or successful in achieving your investment objectives. An index is a portfolio of specific securities. Indexes are unmanaged and investors cannot invest directly in an index. Index returns are “total returns” with dividends reinvested, which means the return is not only the change in price for securities but any income generated by those securities. The performance of an unmanaged index is not indicative of the performance of any particular investment. Investments offering the potential for a higher rate of return also involve a higher degree of risk. Past performance is no guarantee of future results. Actual results will vary.
The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.
The value of fixed-income securities may be affected by changing interest rates and changes in credit ratings of the securities.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Indexes are unmanaged portfolios and individuals cannot invest directly in an index. Actual results will vary.
This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel