The markets are volatile and interest rates are increasing. Inflation is rampant. You have earlier thought about investing and you were sure that you wanted to invest. Now you are not so sure. And even if you wanted to invest, when is the right time to start? You are new at this, and you know that times may be tough with a potential (if not one already) recession. Jobs may be lost. Funds may be tight. What do you do?
Why you must invest.
We are strong believers in the power of investing to help you attain financial independence and freedom. In fact, that is why we exist. And in all of our posts, we try to make investing as simple as possible for you to understand. Investing is not hard. But like anything that is new, it takes some time to understand the language (See “What is Financial Literacy?” and “Why are Investing Terms so Scary?” and also introduce you to concepts, ideas and terminology that you need to know to be a successful investor. However, even with all that, you might be hesitant, given the current market and economic situation.
Don’t.
Investing is SO important.
Why?
The chart below, from Charlie Bilello, founder and CEO of Compound Capital Advisors, says it all. The chart shows the historical record of inflation-adjusted returns of the S&P500 Index compared to the purchasing power of a consumer dollar. As you can see, as the S&P500 Index has increased, the converse has happened to your dollar. That is because inflation eats away at the purchasing power of our money and so, there is almost no choice but to invest.
This chart is so powerful, precisely because it clearly shows the detrimental impact of inflation on your dollar. We urge you to read our post “Inflation is the silent killer of your financial wealth” and to start investing today.
Every individual faces inflation risk. What is inflation risk? That is the risk that inflation will erode the value of your money because of the drop in purchasing power. In other words, what you could buy for $1 today will be more than what you can buy for $1 tomorrow. Countries with higher inflation see a faster erosion of their purchasing power.
Whether you are invested or not in the stock market, simply by existing and having a need for, and holding, cash – which every person on earth needs – exposes you to this risk.
You are already feeling the impact of inflation right now, as the United States – and many other countries – face high inflation rates. In fact, the price of basic needs, such as food, gasoline, homes, and electricity have all gone up drastically, and this increase has left less for other purchases.
While there is a short-term risk to investing, the longer your time horizon, the more you can and will be able to manage this risk. See “Zoom Out.”
Thus, there is no question that investing is critically important to your financial independence. And the sooner you start, the better off you will end up. See “Time and Amount Invested Are Both Important.”
Start investing today.
“The stock market is a device to transfer money from the impatient to the patient.”
–Warren Buffett
“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has.”
– Jack Bogle.
Key: Why you must invest.
Check out our website SHALnCO for more resources on investing, including courses and eBooks, our weekly Substack newsletter and products.
Nothing in this email is intended to serve as financial or investment advice and you should do your own research and consult with appropriate advisors.