These days we need to make an annual return of around 4.5% just to keep up with inflation -- and with interest rates so low, cash in the bank is being eroded daily. And who knows, we might have a further recession ahead of us, or even a euro meltdown. So is it worth bothering with investment at all in such uncertain and despondent times like these?
Well, yes, it is, and here are five reasons why...
Everyone is fearful
There's a well known quote from Warren Buffett, which has been doing the rounds a lot of late, and I make no apologies for repeating it...
"Be fearful when everyone is greedy. Be greedy when everyone is fearful."
Hark back to the dotcom boom when everyone was being greedy. I recall listening to people in the pub banging on about the next sure-fire winner they were going to put their money on -- and these were people who knew absolutely nothing about investing in shares.
"No, that's way overvalued -- it'll be worth a small fraction of that in a year or so", I'd say, only to be laughed at the next day when it had gone up another few percent. And, well, you know what happened next.
Today the opposite emotions hold sway, and the popular message is that shares are poop. And that I reckon makes now a great time to buy -- when they're being sold for bargain-basement prices because too many people have become too scared.
There are some great bargains
If you've been reading anything in recent months, you'll know how many of us have been picking our lists of super-cheap bargains.
I picked five shares early last month that I thought were real steals, and I stand by them for anyone investing with a five-year-plus horizon. And I'm pretty much behind the selections made by my Foolish colleagues, too. The truth is, there are many quality companies out there that Fools have followed for years, and many of them are much lower priced today than they have been for quite some time.
We hear a lot about moving to 'defensive' investments in tough economic times, and that's led plenty of people to abandon their shares in the 'risky' stock market and seek so-called safe havens such as gold.
Such moves have pushed the price of the shiny but ultimately worthless stuff up to record highs -- gold's around $1,800 an ounce now, and there are people forecasting $2,500 for next year.
But is gold safe? No, of course it isn't, it's just another consumer-led bubble. And when people decide it's no longer the thing to hold, they'll be selling it and the price will tumble.
No, the real defensive things to own are shares in companies earning good profits and paying good dividends -- where you can expect to receive that income next year, the year after, and for many years to come, while the magpie gold-hoarders have nothing to rely on but emotion.
Time in the market
Timing the market is a mug's game.
Sure, some people are better at timing than others, and some are successful at shorter-term investing, and even ultra-short-term trading.
But you know, I reckon the number of people who think they are good at timing the market outweighs the number who actually are by quite some margin -- remember the 80% of drivers who believe they're better than average?
For most of us, market timing simply isn't a realistic option, and for serious long-term investors, it really doesn't matter anyway -- the secret is to get our money invested in shares in good-quality companies and just leave it there.
It really is long term
This one follows on from the previous four reasons. Simply, put aside emotion, fear, greed, fad, fashion and the madness of crowds... and just plonk down your wad to buy portions of businesses that are going to carry on making money for you for decades to come.
And over the very long term, no other kind of investment really can beat shares, because the combination of capital and labour that they represent is the only thing that actually creates wealth. Everything else -- bonds, gold, property, whatever -- is secondary, and relies entirely on the wealth generated by business to keep it going.
Source: By Alan Oscroft in Investing