Q3 2021 Review - The Best Time to Invest

I love the Chinese proverb: "The best time to plant a tree is twenty years ago, the second-best time is now." When I became aware of the proverb a couple years back, I began to suggest to clients and prospects that the same is true for investing as well. The best time to plant or invest is now if you didn't in the past.

How do I know this is true for investing? Consider: In one of the pieces of literature I share with prospective clients we look at the returns of various asset classes compared to the rate of inflation starting in 1926. For those of you who are unsure - that is before the Great Depression and the subsequent market crash associated with it.

Here's what it illustrates:

Since 1926, inflation has eaten away a large part of the buying power of the US Dollar. In fact, you would need to have $15 now to have the same buying power. However, my purpose is not a diatribe on inflation - but rather the power of investing over many years. So the question I would pose to you is this: Even though the great depression happened AFTER 1926 - how much would $1 invested in large US companies in 1926 have generated by the end of 2020?

The answer is $10,937!

What is more astounding is that if you had invested in small US companies you would have $32,817 for every 1 dollar you started with in 1926! That means if grandpa had invested 10k in 1926 his descendants would be sitting on an estate worth north of 328 MILLION dollars!

Not only is this an incredible testament to the power of compound interest but to the magic of capitalism! I say this acknowledging that in May of 1932 you would only have 52 cents for your dollar from 6 years earlier! Even if you had put money in at the peak of the market prior to the great depression your actual dollar returns from then to now are simply incredible and would make you wealthy beyond most people's ability to comprehend.

While I understand the temptation to try to time markets - time and again the results of Wall Street's "best and brightest" who try have been devastating. The reality is that no one knows how all the geo-political and economic variables of the future will come into play - or even if we did know them how the markets would react to those set of circumstances. (who would have predicted returns since a worldwide pandemic in March of 2020 of almost 50 percent!).

So if you are tempted to wait to invest because it's "too scary" right now because of all the challenges going on in the world - you should reconsider. You don't need to "time the market" but rather you need "time IN the market" to produce awesome returns which will bless your family for generations. Twenty years ago was a great time to invest, but today is also a great time.