Why waiting for the perfect time to invest is a mistake

Bryce: [00:00:31] Welcome to get started investing a podcast where we help you learn to invest in 15 minutes or less. Each episode we take one real world business story and apply a key investing lesson to help you build your investor toolkit. If you're joining us for the very first time, welcome. We strongly recommend that you scroll up and start at episode one. And just a reminder before we do get stuck in, we are not experts, we're not finance professionals and we are not licenced. So we're here learning just like you, and nothing on this podcast should be taken as advice. With that said, though, let's crack on. My name is Bryce and as always, I'm joined by my equity buddy Ren. [00:01:07][36.1]

Alec: [00:01:07] How are you going? I'm very good. Bryce excited for this episode. We've only got 15 minutes. Let's crack in. [00:01:12][5.4]

Bryce: [00:01:13] That's it. So today we're unpacking. Investing at the worst time is still better than not investing at all. And this episode is all thanks to shares these who let you invest with no minimum. Pretty amazing. [00:01:26][13.2]

Alec: [00:01:27] Pretty like zero money. [00:01:28][1.4]

Bryce: [00:01:29] Zero shares. This platform was recently awarded a 2022 Canstar Innovation Excellence Award, with the judges saying Ren that the platform is quite unique with a significant wow factor as it reduces barriers to entry for new investors. Full credits and shares is all investing obviously involves risks, terms and conditions apply and if you are interested in downloading the shares is up head to shares these dot com w or visit your app store. But Ren, what's the news story? [00:01:59][30.2]

Alec: [00:01:59] Yes. So as you said, all investing does involve risk. And we've seen that risk play out in markets this year. There's talk of a recession, there's a lot of inflation and markets are down. And we've seen a few big names sell shares. And so I guess the question that comes out of that process is if a lot of these people are selling and we'll get to them in a second, should we sell as well? And the three big names that have sold Elon Musk, number one, Elon Musk, Ola, his name is always floating around, isn't it? Yeah. He sold $7 billion of Tesla shares, takes his total sales of Tesla shares in the last year to over $30 billion. He's cashing out. [00:02:43][44.0]

Bryce: [00:02:44] He is cashing out in a big way. Michael Burry, famously known for calling the global financial crisis. You'll see him in the movie The Big Short. [00:02:51][7.5]

Alec: [00:02:52] Well, you'll see Christian Bale playing. [00:02:53][1.3]

Bryce: [00:02:54] Yes. He has sold all but one of his stock positions. [00:02:57][3.5]

Alec: [00:02:58] Yeah, we talk about that a little bit more over on Equity Mates. But then the final one, right, that I came across last night, Tiger Global, they're probably one of the bigger names in the the tech run up of the last few years that were big investors in tech. They've even sold a lot of their tech positions. They are down a lot on some of them this year, but they didn't have the conviction to hold. They sold out and maybe sold out right at the bottom. But a lot of investors, a lot of big names are selling. And I think the last week there's been a lot of headlines about these people selling. So that leads us to the lesson today, because we all want to invest at the best time. We all want to buy low, we all want to buy the dip. And we should we should be thinking about when there's more opportunity. But what we wanted to do is have a look through history and take a look at some of the absolute worst times to invest and ask the question, is investing at the worst time better than not investing at all? [00:03:54][56.2]

Bryce: [00:03:54] Well, the lesson then is that it is, yes. [00:03:56][1.9]

Alec: [00:03:57] I mean, the fact that we're talking about it probably indicates what the answer to that question is. But I think this is really important. And I always there's one story that I always trot out when we get interviewed or we do a live show. And I always remind myself of these stories and they start because it can be scary investing when, you know, there's headlines and that, you know, the economy is headed to a recession or that there's inflation, you get really nervous and you might decide that investing is too risky or it's not for you. And these are some of the stories that I remind myself, and I think they're good ones to share for people who are just getting started and who might be thinking that they won't get started. [00:04:41][43.8]

Bryce: [00:04:41] Yeah, well, let's have a look around. So we'll start it with an example of 2008. We spoke about Michael Burry. This was the start of the global financial crisis, probably a point in the most recent point in history other than the crash of during code, of course, where you would be feeling incredibly scared about not investing. [00:04:59][17.4]

Speaker 2: [00:04:59] What we know now is Wall Street can bring down Main Street. And frankly, I'm going to tell you, it's a little scary. Your company is now bankrupt. Our economy is in a state of crisis. Did you mislead your investors? And I remind you, sir, you're under oath in your testimony today. [00:05:14][15.0]

Alec: [00:05:15] Yes. So Lehman Brothers, the investment bank, it collapsed on a monday, let's say the Friday before Lehman Brothers collapsed. You bought an S&P 500 index fund, a fund that just holds a little bit of the 500 biggest. Companies in America. If you'd bought that on the Friday and then Monday, Lehman Brothers collapsed. That is the worst time to buy the American stock market. Six months from that day, you would have lost half your money, down 50%. Ouch. [00:05:46][31.0]

Bryce: [00:05:46] Ouch. [00:05:46][0.0]

Alec: [00:05:47] If you had just held through the global financial crisis and beyond ten years later, from when you first bought on that fateful Friday, you would have doubled your money, doubled the price, even though you were down 50%. But the a the kicker to that story, if you had reinvested your dividends throughout that time, you would have tripled your money. Yeah. So even if you'd invested at the very worst time, it would have definitely been better than not investing at all. [00:06:18][30.5]

Bryce: [00:06:19] What if you invested on the Tuesday? You would have absolutely smashed. [00:06:23][4.4]

Alec: [00:06:24] Well, that's true. I mean, the market didn't collapse 50% in a day. [00:06:28][4.3]

Bryce: [00:06:29] Well, but I mean, he's, like, investing on the Friday. You wouldn't you wouldn't have known it's coming. [00:06:33][3.7]

Alec: [00:06:34] So you wouldn't have. [00:06:35][1.4]

Bryce: [00:06:35] Yeah. So the scary time, I guess investing at the worst time is actually saying, I'm going to. [00:06:41][5.3]

Alec: [00:06:41] Go on sale. [00:06:41][0.4]

Bryce: [00:06:42] I'm gonna get in on the Tuesday where you say the collapse on the Monday. The worst time in some people's mind would be to say, okay, well, we've we've the Lehman Brothers have collapsed. I'm going to get in. [00:06:52][10.3]

Alec: [00:06:52] Yeah, true. Imagine if you had invested not just that Tuesday, but every time you got a paycheque, you invested a little bit in a in your chosen investments. Every Tuesday or every the first Tuesday of every month, whenever you got paid and your dollar cost averaged all the way down and all the way up. [00:07:11][18.8]

Bryce: [00:07:12] That would have been awesome. And yeah, that would have been epic. And I think and platforms like shares these do allow you to get into the markets in small increments like that. And I think we did talk about dollar cost averaging when. [00:07:25][13.0]

Alec: [00:07:25] You can invest a cent a day on shares is because the admin that I log in every day but they do make it easy. [00:07:32][7.4]

Bryce: [00:07:33] To make. [00:07:33][0.2]

Alec: [00:07:33] It and according to that can start to judge they have a significant wow factor. And you know what, we all need a bit more wows in our day. So that's one historical example. But Bryce. That's not the only historical example. [00:07:45][11.6]

Bryce: [00:07:45] No. Let's go back even further. 2000 NASDAQ, the tech heavy index over in the States peaked on the 10th of March 2000. So then what happened if you had bought in day? Q It's a tech index ETF the week before. If you bought it on the 3rd of March, a week before the crash or the height sorry, by September 2001, a year and a half later, you were down 75%. [00:08:13][27.3]

Alec: [00:08:14] Yeah. You'd turn the dollar into $0.25. [00:08:16][1.9]

Bryce: [00:08:18] Now that hurts. But it took until 2015. Yes, that's 15 years to get back to the point at which you got into the market. However, if you managed to hold from that point, it then went gangbusters by January 2020. You've doubled your money. By January 2021, you've tripled your money. Yeah. So again, another example of how staying in the market and continued continuing to invest during periods where it probably feels and goes against all your inner emotion and feeling to keep investing when markets are at their worst. It's another example that it has paid dividends. [00:09:00][42.4]

Alec: [00:09:01] Yeah, now that isn't with dividends reinvested. So if you had reinvested dividends, it would be even higher. But that's 15 years. So that's a long time to be down. Half my life in less than half my life because I'm younger than you. But that's I think that's like that's a really important illustration of it's not easy to be a long term investor. Like 15 years is a long time. But that's that's what we mean when we talk about long term investing. It's, you know, if in 2000, I told you in 20 years, you would have tripled your money, but it just would have been a slow, linear grind upwards. You would have taken that? Yeah. Hell yeah, I'll triple my money. But the way the market doesn't move in a slow, linear grind upwards, it. [00:09:43][42.3]

Bryce: [00:09:44] Depends how far you zoom out. [00:09:45][0.9]

Alec: [00:09:46] Okay. Okay. But but I think I think you would invest at the very worst time and today you're still more than okay. Yeah. And so those are the stories that I always remind myself of when I'm thinking about this stuff. So those are the stories. [00:10:01][14.5]

Bryce: [00:10:01] Bryce Can I just add one thing to that? [00:10:03][1.6]

Alec: [00:10:03] Of course. [00:10:03][0.1]

Bryce: [00:10:04] Thank you. I think the other part that I remind myself when you write 15 years is a long time to get back in the grain. But one of the key things that we talk about often is making sure that the money you're putting in the market is not needed for any other purpose than investing, which should give you the comfort that if it takes five years, if it takes ten years, if it takes 15 years, that money is not going to be needed elsewhere. And you're not going to want to pull it out. You're not going to want to. You need it for an emergency. And so having that money in the account for no other reason then to invest should make your horizon as long as possible. [00:10:38][33.6]

Alec: [00:10:38] Yeah, and that can sound quite privileged to say just take the money that you don't need to live and put it in the market. And traditional. Yeah, it was because you needed a minimum of $500 to invest and not everyone had that money to invest. But platforms, shares, this is one of them. There are other platforms, but I think shares you said no minimum you can literally invest $0.01. And so even if you start with like really small amounts, you make a coffee at home rather than buying a coffee at the shops and you take that for dollar dollars. Well now it's probably like $5 for it. Yeah. And so you take that 558 and you put it in the market like that adds up and compounds over time. So the idea that it's not money that you need, it can sound like, Oh, well then it's not for me because I need my money. But even a dollar here, a dollar there, the small amounts bring let's bring it back to Australia because Vanguard have pulled out some data, a $10,000 investment in 1991, the year that you were born. [00:11:35][56.5]

Bryce: [00:11:35] Yes, correct. [00:11:36][0.6]

Alec: [00:11:36] So $10,000 invested in Australian shares in 1991 by 2022 was worth $131,413. So that that's about 9.8% return a year. But again, that's not a slow linear grind upwards because what happened, what's happened in your lifetime? Bryce between 1991 and 2002, aside from the Sydney Swans winning two premierships. [00:12:02][25.9]

Bryce: [00:12:03] The Bombers won in 2000, when from a market point of view we've seen some incredible market action. 1997 Asian Financial Crisis, 2000 Tech Wreck, 2001 Terror Attack, 2008 Global Financial Crisis, the end of the mining boom. Here in Australia we've seen five prime ministers in five years. We've seen COVID hit, we've seen the COVID rebound and now we're seeing political tensions and war over in Ukraine. That's also having impacts. We've seen inflation like we've never seen it before, yet we've still managed to turn 10,000 from 1991 into an astonishing $131,413. [00:12:40][37.0]

Alec: [00:12:43] Yeah. Now, that's that's the story that we have to keep reminding ourselves as investors are even investing at the worst time is better than not investing at all. That that is the lesson that history tells us now. Bryce the final question, as we get to the end of our 15 minutes, why shouldn't I sell and then buy back in? [00:13:01][18.9]

Bryce: [00:13:02] How do you know when you're going to buy back in? [00:13:03][1.3]

Alec: [00:13:03] Great question. So there's some data from the S&P 500 from America that really illustrates this point. You have to stay invested because you don't want to miss the best days. And over a 15 year period from 2006 to 2021, if you would miss the ten best days on the stock market, the ten days where the stock market went up the most, you would have missed out on more than half of your returns. $10,000 invested in 2006 would be worth $46,000 in 2021 would have been worth $46,000 in 2021. If you miss those ten best days, you would have been worth $21,000. [00:13:41][37.2]

Bryce: [00:13:42] Wow. [00:13:42][0.0]

Alec: [00:13:43] And you don't know when the best days are going to happen. And so that's why if you sell and then you buy and you miss the rebound and then you buy back in, you miss some of those really good days. And so the data shows us that, again, it's not a slow, consistent grind upwards, that sometimes you have big up days and you don't want to miss them. So that's why the data suggests well, that's why history shows us that staying invested is important. [00:14:08][24.7]

Bryce: [00:14:08] Staying invested is incredibly important. And I hope those few facts there really highlight that. And I think we should close just by saying we know that it's a hard thing to do. We've we've been there experiencing your portfolio falling upwards of 50% is not an easy thing to to stomach. But you know, these, these sort of stats, these stories help us at least get through those times and remind ourselves of the beauty of being a long term investor and the fact that we have no one else to answer to other than ourselves when it comes to investing. We don't have mandates like the professionals do. So something to keep in mind, but a big thank you to shares is for supporting this episode who have been awarded the 2022 Canstar Innovation Excellence Award. Not only do they have wow factor Ren, but they can star flag the platform's competitive pricing structure, especially for smaller investment amounts, which you've spoken about today. You don't need huge investment amounts to get started and paired with a focus on education and financial empowerment. [00:15:07][58.7]

Alec: [00:15:07] Yeah, love that screen. [00:15:08][0.8]

Bryce: [00:15:09] That's it. We'll pick it up next week with another news story. Don't forget, grab Finn Fest tickets Equity Mates dot com slash fin fest. Check out all the other content that we're doing. If you're enjoying this format, let us know. Contact@equitymates.com. Similarly, if you're interested in more business news, check out our business news podcast, The Dive in your podcast. Now. Ren will pick it up next week. [00:15:31][21.9]

Alec: [00:15:31] Sounds good. [00:15:31][0.0]

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