Equity returns over the long term

If you look at the graph of the last 120 years on the S&P500, you will see that we are currently living in a small downward blip when it comes to equity returns. As a matter of fact, we are already out of the blip and higher than when Covid-19 started. You have two types of people in the world: those who see only danger and those who see only opportunity. Okay, that is a bit of an exaggeration, there is a wide continuum between those two extremes. The point is, positive people outperform negative people without even trying.

From a very young age we should realize that life is not always an easy ride. Perhaps you were bullied in pre-school by that big boy and perhaps that big boy was abused by his parents. Perhaps your heart was broken by that pretty girl or handsome boy in secondary school and that pretty girl or handsome boy was not appreciated by their boyfriend or girlfriend. The point is that life is an ever-changing environment, some good and some bad, but if you can stay positive and inventive you will always be better off than the people who react with negativity.

Over the millennia there has always been a battle between government and business. Although government officials think they are very important, they are not. It is business that drives progress and innovation, that makes our world a better place. It is the job of government to ensure that everything that happens, is to the benefit of the population. As a general rule government should be supportive of business and only intervene when business negatively impacts the people.

To bring this back to investments, we can see from the graph that bad things happen, either because of the actions of government, or the actions of business. As an investor you can choose the environment you want to invest your money in. To give you an example, currently you can choose to invest your money in Europe, where the politicians are so focused on politics that they regulate any chance of innovation out of business. Or, you can choose the USA, where companies are allowed to innovate and make life better for everyone. It makes you wonder whether the famous words uttered by JFK, “Ask not what your country can do for you, ask what you can do for your country”, should not be the other way around?

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