Its Getting Worse.. Should You Invest Now Or Wait?

This has been the worst time for investors in around 50 years.. What should investors do with this information and what is the correct way to act considering everything is going wrong.

The worst stock market performance since 1970. do you ever feel like you’re late to the pie like every time there’s a sniff or something good you hear about it and then just get there too late while i’m sat here reading these headlines about the worst start in 50 years i can’t help but feel sorry for new investors all excited to see the party pumping you got yourself

All dressed up in your best outfit didn’t you grab yourself a four pack and a tub of hummus out the fridge you didn’t want to show up empty-handed but when you got there you agreed to buy another type of deer we are not buying this dip so today i want to explore this claim of the worst start in 50 years and just get under the skin of it a little bit try and figure

Out what we can do about it so if you’re feeling like the last to be picked underappreciated if you’re always the bridesmaid never the bride then this one’s for you i don’t know what to do about the depression and the inflation and the russians and the crime in the street all i know is that first you’ve got to get mad that clip was from a movie called network and

That scene actor peter finch goes on this epic rant where he bemoans the state of the economy and encourages people to get around what’s crazy about this clip as i’m sure you’ll agree is the striking similarities that it shares with today the film was released 46 years ago and was made right about the time these articles are saying the last worst period was for

The stock market between 1973 and 1974 the s p 500 which is the largest 500 or so companies in america fell 40 in value so depression an energy crisis high inflation and a devaluing of the dollar are just a few ways that the economic situation of the 70s mirrored that of today minus 40 was the final score back then so just how bad are things today i don’t have to

Tell you things are bad yeah i mean it’s pretty bad look the astute if you’re going to be sat there thinking why is this guy got lightsabers on his walls and you might also be pondering the fact that if in the 70s the markets dropped by 40 that’s well more than we’ve seen so far in 2022 and you would be right but the thing that sets 2022 apart is the speed of the

Decline so far in the first 10 months of 1973 the markets fell 10 and not to make anyone question their decision to come to the park a but then 2022 comes along says oh my beer mate and drops in with a huge 25 down year today 10 trillion dollars up in smoke and we ain’t done yet a whole host of factors are working against the market at the moment making the prognosis

Look rather grim as well as that there’s just nowhere to hide from investors at the minute in a rare set of circumstances both bonds and stocks are being decimated which means the world’s most popular portfolio the 60 40 allocation designed to help you whether any storms looks like it’s peddling backwards at the minute it’s like pedaling and hummus like the hummus

Jokes the situation’s pretty bad but you already knew that didn’t you so what as investors should we do about it i mean this is the worst start to the market in 50 years surely if there was ever a time that you were going to do something now is the time you need to take action but before we get into that let me tell you about today’s video sponsor nordvpn let me

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Are you doing in here i need you up making an advert if that’s okay nice if there’s one area of investing that i find more fascinating than the rest it’s the psychology of it all our minds make us bad investors cognitive dissonance is the discomfort you feel when your behavior does not align with your values or beliefs you want to be fit and eat healthy but you

Just can’t put down the breadsticks and hummus that guilty feeling you get whenever you eat it is cognitive dissonance when it comes to investing cognitive dissonance can make us make bad investing decisions like right now investors knew and all feel discomfort because the notion of average returns has gone out the window in the face of the worst start to invest

In in 50 years you signed up for a 10 average return and instead it feels like the markets are giving you there’s been countless studies and papers on how to address this and how to act at times like this but i like this one there’s feedback on personal investment success help the tldr on this paper is essentially that within the professional investing world the

Smart money world they get feedback on their investment decisions so if you work at an investment bank you’re surrounded by data professionals systems and if you balls up the going to turn around and go this is what you did wrong and this is how to fix it going forwards as dumb money or retail investors as they call it either works we don’t get that feedback the

Study comments on the fact that only one out of 120 banks in germany that allow people to invest give feedback on a regular basis so linda stefan and sophie who wrote this paper did give feedback they took 1 500 investors and at the end of each year they sent them a report saying this is how you did and this is what we would do to fix it going forwards and guess

What it made them better investors i’ll quote the paper directly we find that after receiving reports investors trade less diversify more and have a higher risk adjusted performance relative to the control group and these effects become stronger over time so how do we get this feedback that we need from the market like i’m not offering to sit here and grade your

Portfolios like some teacher because let’s face it i’m just as clueless as to what the hell is going on as the rest of us but in the words of william wordsworth life is divided into three terms that which was which is and which will be let’s learn learn from the past to profit by the present profit in the present is definitely the goal here so let’s learn from

Life’s greatest teacher the past is it just me or was that a really long-winded way of saying let’s take a look at some past results to see if we can get some answers here he’s wasting your time in this section i’m going to be quoting the work from an evelyn trius from seeking alpha and the full article is linked below for you it’s called getting in at the worst

Time and still emerging with the best investment if you wanted an example of conflicting inputs that could lead to cognitive dissonance that title has it all starting at the worst time but ending in the best place so the article basically looks at the three biggest most recent crashes we’ve had the tech bubble which popped in 1999 the financial crisis which tour

Investors a new one from april 2007 and then the most recent the covert crash which lasted a whole two months evelyn then applies three investment strategies to each period of time and see who does the best what i’ll do is i’ll explain each investment strategy to you briefly and then i’ll give you the overall findings like the headline figures and results rather

Than going through each one individually as that’ll be a lot of data for this video like i said i’ve linked the article below it’s well worth a read personal investment strategy number one investor hundred dollars at the peak of the market and then just invest a hundred dollars every month consistently until now so they get started at the worst possible time before

Someone accuses me of high treason in the comments i’m saying dollars because the article is literally written in dollars and let’s face it it’s all worth the same anyway nowadays personal investment strategy number two saves the hundred quid from the top of the market and waits till the bottom of the market they then start investing their hundred dollars every

Month from there and saves that part of cash so the best way to think about this is in the covered crash that individual would have waited for two months to get started and saved up their hundred dollars each month into cash and it would have had a part of 200 weight in there they wouldn’t have then thrown that into the market at the point that the market hit the

Bottom assuming they were able to call that they would have then just started investing 100 a month and that end result is the result of investing from the best possible time to start a hundred dollars each month until now plus the 200 in cash that they saved that they didn’t invest because they waited finally personal investment strategy number three is just a

Straight up genius they also saved a hundred dollars waiting for the best time to invest but when that time came around they then dumped all of that money into the market and then continually invest a hundred dollars a month going forwards so the interesting thing is the outcome or who performed the best is the exact same across all three time periods across all

Three crashes the only difference is the total amount they have at the end because of the amounts of time they would have invested for i’ll read her conclusions word for word based on history it pays quite literally to begin investing as soon as possible and to keep investing in the market as often as possible even in the worst case scenario when the markets crash

Right before you start to invest history shows that investing early you do 10.3 percent better on average than you would have if you saved your money and only started to invest at the lowest month of the past three big crashes so the person who sat it out and waited performed on average 10.3 percent worse than the person who just got involved even though they

Started at the worst possible month but what about that person that was a bit of a genius on the other hand flawless market timing in scenario three only earns 3.1 percent more money than investor who starts investing right before the crash the payoff in this example for the person is perfect isn’t even that much better than the person who invested at the worst

Possible time and that assumes that you have the ability to flawlessly time the market and then the metal the brass to pile your money in when you think you’ve hit the bottom i’m just going to put it out there you don’t no one has the ability to consistently time the bottom of the market the reason this example works is feedback is we can look back retrospectively

And hypothetically go if someone bought here if someone bought that no we don’t trade a big bottoms or we don’t have an opinion about whether the stock market is going to go tomorrow or next week or next month so to sit around and not do something that’s sensible because you think there will be something even more attractive that’s just not our approach to it the

Desire to act and do something based on headlines like this will likely cost you money unless you are literally an investing genius really that’s the point of this video you see there are two types of investors there are long-term investors who are looking to build wealth over an extended period of time and then you have speculators who wish to make money from

The market short term the media with headlines like this are catering to short-term speculators because let’s be honest those types of headlines are great for grabbing attention cnbc and the likes of are going to run out of things to say if they’re messages yeah things are bad at the minute but long-term consistent investing has always proved to be successful for

Investors i mean it doesn’t bite well for my channel does it but i won’t worry about me i started talking about 30 odd years ago i haven’t stopped since so i should be good but as long-term investors we mistake this chatter and noise for feedback as it’s the only noise we get making it sound like this is the worst it’s ever been it’s an awful time to invest and you

Should be steering well clear of the market this is why i showed you that clip at the start because it serves as a reminder as feedback from the past it tells us that the markets have seen it all before if you’re still not convinced and you feel like you need more of a therapy session then you need to watch this video here in which i outline how i’m approaching

This whole market mess so yeah sit down get comfy and let’s get pressure be calling left for my blessings i feel like i’m falling the birdie is back

Transcribed from video
It's Getting Worse.. Should You Invest Now Or Wait? By Damien Talks Money