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It’s Tuesday, November 24th as I’m writing this. Watching Lord of the Rings: The Fellowship of the Ring for what must be the 20th time in my life, never gets old. Another thing that never gets old is the good old American stock market.
The Dow Jones Industrial Average and the S&P 500 both hit record highs (again) today. Seemingly fuelled by the presidential election, the recovering economy from the COVID-19 market crash earlier this year, and hope that many vaccines reporting successful results will provide relief and a cure for COVID.
All of this, despite the fact that COVID is not in the least disappearing, in fact I would say it’s as worse than it’s ever been. At least here for us in the Western hemisphere. In the U.S. I believe the numbers are consistently over 1,000,000 new cases a week, and here in my home town of Winnipeg, we’ve been in a ‘code red’ lockdown already for a couple of weeks. Only online orders or curbside pickup for non-essential shopping, not allowed to visit anyone, and of course masks on at all times in public places. I’m not complaining about the masks, but it’s hard to imagine all-time high stock markets at a time like this. Logic would point you in the complete opposite direction, thinking everything should be at yearly lows.
It just goes to show the power and resilience the markets have. Events impact markets, there’s no denying that in the slightest. But history has shown and proved to us that through world wars, depressions, conflicts and crises, markets continue to increase and provide wealth to those that participate. As bad as things may be, markets have been through worse, and have thrived.
Growing up, investing and wealth was a foreign topic, not understood or discussed. So anytime investing came up, it was always made to be incredibly risky and uncertain. But as you may have guessed, the more I’ve learned about investing, the less and less risky and uncertain I’ve come to realize it is — when done properly, of course. The short-term can be uncertain, and it’s impossible to know what will happen over a short time, but in the long-run markets work, and they work very well.
It reminds me of a hobby of mine—rock climbing. Rock climbing is thought (mainly by people who don’t do it) to be extremely dangerous and risky, similar to investing. But climbing is pretty safe when you take the right precautions — just like investing when you do it properly.
The few who unfortunately have accidents while climbing are the ones who often take extreme risks, or are pushing the sport to new boundaries. With investing, the people who often take on the biggest risks are those who are very wealthy and can afford to lose some in order to hit home runs with a few others. For the average investor or the average climber, taking precautions, seeking advice, and sticking to a plan should provide great results. For climbers that looks like inspecting your gear, ensuring you know what to do, making sure you are comfortable with your climbing partner, and not going too far outside of your comfort zone. For investing, that means incorporating things like diversification, a proper asset allocation, working with a financial advisor, and knowing and sticking to a plan that helps you reach your goals.
In life, things are most risky when we don’t understand them, or when we don’t take the time to understand them. By seeking more knowledge and taking a comfortable approach to things, we can help get out of our comfort zones and find a place where we see benefit, progress, and most importantly, put ourselves in a better financial position.
About the Author
Winnipeg based Financial Advisor focusing on investments, financial planning, and mortgages. I prioritize education, because I believe the more we know, the more we all benefit. It allows me to help people make the most of their financial future.
Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.