What really cheeses me off

So, my day job is picking stocks.

I run three different services here at The Motley Fool, each with some incredibly smart, dedicated people.

Together, our job is to find ASX- (and US-) listed companies that we hope can, over the long term, deliver on the stated goal of each service.

But it’s not all I do.

And it’s probably not even the most value I add, for our members or our readers.

Most of the value I hope I add actually comes in the soft stuff.

Huh?

See, I’ve written before that research has shown two things:

1. Most managed funds underperform the market; and, more worryingly

2. Most fund investors underperform the average fund.

That’s pretty damning.

But I’m going to add a third, unproven, statement:

3. Most people don’t invest, at all, or give up early.

See, when I’m picking stocks, I’m trying to find the cream of the crop.

I’m trying to do better than the market.

But that’s just the cherry on top.

That’s the extra 1% or 2%, per annum, that I’m trying to find for our members.

But the cake itself?

That’s the 9% or so, per annum, that investors can get just from earning the average market return (speaking historically, at least).

Literally all you needed to do was buy an exceedingly low-fee index-tracking ETF and go fishing (or shopping, or clubbing, or golfing, or gardening. You get the idea.)

And yet.

And yet, most people don’t.

Which is a crying bloody shame.

How much of a shame?

Well I’ve told you before that over the 30 years to June 2022, you could have turned $10,000 into $130,000 (before fees and taxes) just by investing in an ASX index fund.

That much!

Seriously, it was there for the taking.

A 13x return.

Was it guaranteed? Nope. Nothing in life is, let alone investing returns.

But that return wasn’t meaningfully different to the decades before it, so I’d argue it was pretty likely, give or take 1% or so, per annum.

Hell, even if your return was half of that, you’d have ended up with $70,000.

We can argue about specific returns, but that’d be missing the forest for the trees, don’t you reckon?

And if you think it riles me up, you’re right.

I hate the fact the doom-and-gloomers dissuade people from investing.

I hate the fact that the conmen and shysters give investing a bad name.

I hate the fact that market volatility scares people away from investing.

And I hate the fact our evolution makes it hard to save and invest, because we don’t naturally think in terms of compound returns.

Don’t believe me?

Okay, here’s a question: What’s the difference in total return between 9% per annum and 10% per annum, over 40 years?

50% more!

Yep. 1% per year is 50% difference over 40 years.

And between 8% and 10% per annum?

More. Than. Double.

Let’s try a different one.

The difference between 10 years and 20 years at 9% per annum?

136%

And 30 years?

Not double.

Not triple.

You’ll have 5.5 times as much money as you did after 10 years.

And that’s why this is such an important topic.

And why it can be so frustrating.

Historically, there has been extraordinary wealth created by those who simply invested.

And even more by those who invested, then invested again. And again. Adding money regularly, like clockwork.

You didn’t have to be smarter than the other guy.

You didn’t need any special insights.

You didn’t even need to pick stocks.

You just had to invest, then leave well enough alone.

Literally, that was it.

Will the future be the same?

Again, I can’t – morally or legally – make you any promises or offer you any guarantees.

But I see no reason it won’t be.

But – as I said above – even if those future returns are half of what they were in the past, investing will be astonishingly worthwhile.

And if they’re similar to the past? Even more so.

And so, as Lara Bingle might ask, where the bloody hell are you?

Why aren’t you investing?

And if you are, why aren’t you investing more?

Yes, that’s a rhetorical question. There are lots of reasons.

I can’t lower your bills (actually, I can help: #getabetterrate!).

I can’t offer you a pay rise.

And some people just won’t be able to find the extra cash to invest.

But if you can?

I think you really, really should.

Because I think your future self will thank you.

And that’s the most value I can offer, today.

I hope our stock picks can add value to your investing.

But the two more powerful forces are:

1. Starting earlier; and

2. Saving and investing more.

And they’re up to you.

Today’s the day.

What are you waiting for?

Fool on!

The post What really cheeses me off appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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