Why do never-investor always say "the market took x amount of years to recover"?

SneakySpectator

It physically pains me to see the argument of "in 1929 it took 25 years to recover. In 2000 it took 7 years to recover, then crashed again and took another 6 years to recover etc etc.

The act like every investor only buys once with their entire life savings? Seriously who takes £100,000 and just buys once and doesn't do anything for the next 25 years? No investor I've ever known that's for sure. 

So why do all these never-investors use this as some kind of argument to back up why they don't invest? Almost every sensible retail investor I've ever spoken to buys every month, or at least every month they can afford to buy. 

It's called dollar cost averaging, or pound cost averaging for us Brits. 

I think in their mind they think investing is about buying one time and selling one time. So they place so much importance on getting the timing right, that they never actually end up buying at all?

TheBanker

SneakySpectator said:

It physically pains me to see the argument of "in 1929 it took 25 years to recover. In 2000 it took 7 years to recover, then crashed again and took another 6 years to recover etc etc.

The act like every investor only buys once with their entire life savings? Seriously who takes £100,000 and just buys once and doesn't do anything for the next 25 years? No investor I've ever known that's for sure. 

So why do all these never-investors use this as some kind of argument to back up why they don't invest? Almost every sensible retail investor I've ever spoken to buys every month, or at least every month they can afford to buy. 

It's called dollar cost averaging, or pound cost averaging for us Brits. 

I think in their mind they think investing is about buying one time and selling one time. So they place so much importance on getting the timing right, that they never actually end up buying at all?

I guess some people will just invest a one-off sum, e.g. an inheritence. Even if they then add a monthly investment, the one-off is likely to represent the lion's share of their portfolio. 

A lot of people confuse Trading and Investing. The current crop of apps has not helped - in the olden days when you had to phone a stockbroker the distinction was much clearer. 

wmb194

I'm guessing you're relatively young? The point is usually that markets can crash at inopportune moments e.g., just as you're about to retire and you might not have the time to wait for them to recover. It's usually an argument for not having all your eggs in the equity basket.

SneakySpectator

TheBanker said:

SneakySpectator said:

It physically pains me to see the argument of "in 1929 it took 25 years to recover. In 2000 it took 7 years to recover, then crashed again and took another 6 years to recover etc etc.

The act like every investor only buys once with their entire life savings? Seriously who takes £100,000 and just buys once and doesn't do anything for the next 25 years? No investor I've ever known that's for sure. 

So why do all these never-investors use this as some kind of argument to back up why they don't invest? Almost every sensible retail investor I've ever spoken to buys every month, or at least every month they can afford to buy. 

It's called dollar cost averaging, or pound cost averaging for us Brits. 

I think in their mind they think investing is about buying one time and selling one time. So they place so much importance on getting the timing right, that they never actually end up buying at all?

I guess some people will just invest a one-off sum, e.g. an inheritence. Even if they then add a monthly investment, the one-off is likely to represent the lion's share of their portfolio. 

A lot of people confuse Trading and Investing. The current crop of apps has not helped - in the olden days when you had to phone a stockbroker the distinction was much clearer. 

Oh cmon the amount of people making those arguments are not inherent of their grandpappy's life savings. They're youngsters who think investing is taking £10,000 you've got in your 2.5% interest savings account and dumping it in an individual stock and waiting 25 years and hoping you magically have £500,000 at the end of it. 

I'm not saying that's the majority on these forum, but certainly on Reddit. I treat my monthly investing contribution like a bill, like a direct debit the same as council tax or water or energy. It's just something that I pay every month no matter what. 

 

SneakySpectator

wmb194 said:

I'm guessing you're relatively young? The point is usually that markets can crash at inopportune moments e.g., just as you're about to retire and you might not have the time to wait for them to recover. It's usually an argument for not having all your eggs in the equity basket.

Sure but I'm not talking about people who're already in the market, or the elderly. I'm talking about 25 year olds who're so fixed on "buying the bottom" that they never actually end up buying in because even when the bottom is in, there's no way of knowing so they're basically waiting for a bottom that's already happened.

Qyburn

People living off a DC pension are in more or less that same position. Although the value was built up over many years rather than in one go, the position is the same, you start with a given value and it drops or rises with the markets. It's something that needs to be planned for.

boingy

I think the "it took X years to recover" thing is mostly from the press, because they have to find something to say about everything. This week we've seen loads of "dropped to a level not seen since 20xx", which is the same kinda thing.

Can't say it particularly bothers me.

400ixl

Some people still claim the world is flat.

Many people are not financially educated and hold onto headlines that they have heard or been told as if they are the gospel truth and only outcome.

Why are you concerning yourself with people that you know are clearly not financially educated?

SneakySpectator

400ixl said:

Some people still claim the world is flat.

Many people are not financially educated and hold onto headlines that they have heard or been told as if they are the gospel truth and only outcome.

Why are you concerning yourself with people that you know are clearly not financially educated?

Well I enjoy Reddit and /r/stocks, /r/stockmarket and /r/investing has some great content. Mostly memes and people raging haha.

Roger175

The other thing to consider is dividend payments. I have a high yield portfolio of individual shares which I've built up over 20 years or so. I keep a good record of everything and some of the results are enlightening. Some of my holdings show they are down on purchase price but have returned very hansom returns in terms of dividends. I have some shares which have lost 20% on the initial capital value yet have grossed over 200% return in dividends. Someone looking at the index only position would say, I had just lost 20% without seeing the full picture.

As an example, if I bought £1,000 in a company yielding 5% div, and reinvested the dividend, after 20 years I would now have £2,700, even with no capital growth. Your ignoramus looking at the FTSE100 would argue I've not made anything. 

SneakySpectator

Roger175 said:

The other thing to consider is dividend payments. I have a high yield portfolio of individual shares which I've built up over 20 years or so. I keep a good record of everything and some of the results are enlightening. Some of my holdings show they are down on purchase price but have returned very hansom returns in terms of dividends. I have some shares which have lost 20% on the initial capital value yet have grossed over 200% return in dividends. Someone looking at the index only position would say, I had just lost 20% without seeing the full picture.

As an example, if I bought £1,000 in a company yielding 5% div, and reinvested the dividend, after 20 years I would now have £2,700, even with no capital growth. Your ignoramus looking at the FTSE100 would argue I've not made anything. 

I'm guessing you're an "older gentleman" if you have 20 years of investing behind you but once I get to the appropriate age I'll probably shift my VWRP growth fund over to a dividend fund because like you say, having that regular source of income without having to actually sell any of your original investment is probably wise to protect the capital you've built up over time. 

But much like my VWRP fund which is a passive tracker, I'll use a dividend tracker instead of picking individual stocks.