No Fear Of Highs And Lows

“Should I really invest now? The stock markets are hitting fresh highs, after all.” This is a question I hear time and again. No wonder, with stock markets continuously reaching record levels.   

I would like to reply: “Go ahead and invest. The next high is bound to come.” But that would make it too easy for myself, not addressing the underlying fear. 

Because what's really being conveyed is: “I'm afraid of setbacks.” Most people want to limit regret. Regret sinks in when you get in just before a crash with markets peaking, then watch share prices plunge into a deep valley. Such perfect storms are rare, but if people only acted according to probabilities, there would be no lottery and nobody would smoke.

Patience and perseverance pays off

There have been deep bear markets and long waits for the next all-time high, like after the dotcom bubble burst in the late 1990s Stock markets took a nosedive in 2001, and only resurfaced in 2007. This was followed by a brief phase of euphoria and from 2008 to 2013 it was once again a case of “please wait”. 

Those who invested over this period were shaped by these events and and became wiser for it. The world didn’t end, after all. Perseverance was key. 

I think the probability that today’s heights remain unsurpassed over the next few years is extremely low. But alright, I would probably always say that. Because Gutmann looks at the world differently: We don't just invest in “the stock market”, but in individual companies. 

Despite buoyant share prices, the average Gutmann equity portfolio valuation remains in line with the average of recent years. However, external events can always drive share prices down in unison.

Adopt a 5-year plus mindset

My advice to all investors: Think about whether you can cope with a major setback, both, financially and emotionally. After all, no one can answer the question of how the financial markets will develop in the coming months. Opinions are a dime a dozen. But beware: listen carefully and ask questions. The loudest voices are not always the wisest.

If you want to invest in the stock market, you must be prepared to let the money you invest work for at least 5 years. Longer is even better. This directs the focus away from the short-term noise of markets and prices towards long-term participation in a company's success. This is the Gutmann way.