There are lots of good reasons NOT to invest in the sharemarket.
But the prospect of a Greek default and eurozone exit, a 30% crash in Chinese shares and plummeting commodity prices are NOT among them. Neither are a host of other factors currently dominating headlines.
The reasons NOT to invest don't actually change, and have virtually nothing to do with world events.
The reasons NOT to invest lie with you, and you alone.
Here are the main ones:
Because You Want To Get Rich Quick
Contrary to perceptions, the sharemarket is not a casino. But if you treat it like one you can be sure to achieve the same result.
Yes, sometimes you'll hit the jackpot, so to speak, but for those speculating on short term price fluctuations, or investing in high risk 'penny-dreadful' companies, your losses are very likely to more than offset any wins.
If you are looking for investments that will achieve above average returns, and that will compound your wealth over the coming decades, then you are in the right spot. However, if you are looking to double your money in a few months, the sharemarket is not for you.
Because Everyone Else Is
We are social creatures, and it's our nature to go with the crowd. However, when it comes to investing in the sharemarket, following the herd is almost always a bad idea.
When everyone you know is making money on the sharemarket, that's usually the time to be most cautious! The opposite is also true.
Because You Lack The Constitution
Charlie Munger, Vice Chairman of Berkshire Hathaway and Warren Buffett's business partner, once said that; "if you can't stand making a serious loss in stocks you will get the results that you deserve."
Shares can change in value suddenly and significantly — even those in great companies. Sometimes the losses can persist for a long time. Occasionally, even the most prudent, smart and hardworking investors will make poor decisions and buy a lemon.
These things are unavoidable. But for those with the proper temperament, who can look past the madness of short term volatility, that can act rationally and calmly in the face of blinding panic or greed fuelled exuberance, there is great reward in sharemarket investing.
There is no shame in not having the right investing temperament — most people don't — but unless you can master your emotions and maintain realistic expectations, there are better places to invest your money.
Because Time Is Against You
At the end of the day, it is business performance that drives share prices. But the fact is that it takes a business — even a great one — time to deliver on its strategy and potential. Not only that, but it can often take a long time beforethe market recognises the value of the business, and prices it appropriately.
In the interim, all kinds of factors can weigh on market sentiment, and any number of setbacks can temporarily dampen a company's profit.
Because of this, you should only invest money into the sharemarket that you can afford to leave untouched for several years.
Because You Are Lazy
Like anything worthwhile, investing well requires effort. Not necessarily a huge amount, and nothing that is beyond the average person, but it does require a certain commitment on your part.
Read some good books, take an interest in the affairs of the businesses you have invested in, become a member of a credible membership organisation (no names mentioned, of course), and get involved.
Besides, investing in your education can be wonderfully fulfilling and, dare I say it, fun. Oh, and you'll be much more likely to achieve attractive returns!
But if you expect to achieve incredible success without putting in any work whatsoever, the sharemarket is not for you.
Because You Have A System
Here is the only 'system' that you'll ever need: Buy quality businesses, at sensible prices, and hold for the long term. Anything else is most likely a scam.
Seriously, do you really think that anyone with a proven system for easy sharemarket wealth would sell it to you? Of course, they have certainly found one surefire way to make money; to take advantage of people's ignorance and greed.
Dont be one of them.
Foolish Takeaway
There will always be news that makes it seem like now isn't the right time to invest. Presently it's Greece and China, but these issues — serious though they may be — will pass. And when they do, they will be replaced by other events that are just as scary.
That's just the world we live in. But investors shouldn't let these things put them off the fact that the sharemarket can offer wonderful long term returns.
However, not everyone invests in the sharemarket for the right reasons, and if it's not approached with respect, and with realistic expectations, it can lead to very poor outcomes.
As Benjamin Graham, one of the investing greats, once said: "The investor's chief problem and even his worst enemy is likely to be himself."
