What’s the best investment strategy right now?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 404.4 million views in recent years.

In the answers below I focused on the following topics and issues:

• What’s the best investment strategy right now?
• What are the best return investments that use compound interest?
• Would you rather have 1M in cash now or 2M in stocks that you couldn’t sell for 5 years?

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Source for all answers – Adam Fayed’s Quora page.

What’s the best investment strategy right now?

Anybody interested in investing in 2022 (or whenever you are reading this) should do something.

Pick a random date from the past. Then see what was being said on that date.

I will give you an example. 1994.

Below is a lecture from Peter Lynch – one of the most successful fund managers of the last half-century.

As per the talk, what were people worried about in 1994?

Well:

1. Healthcare stocks going down due to some legislation being bought in
2. Would the Dow hit 4,000 or not? It hit 36,000 earlier this year
3. Market volatility
4. Interest rates and inflation
5. 18 million unemployed in Western Europe, which was the worst unemployment rate since the Great Depression.

I could expand that list but I won’t.

What were the worries a few years earlier, as per the talk?

1. The war between Kuwait and Iraq.
2. A financial recession, or depression, in 1990, was caused by the banking sector
3. The crash of 1987, and worries about a depression

As he says, the prediction is always that “this will cause a depression”, or “this is the big one”. It sells more papers.

The point is, that the stock market goes up long-term, but there will always be something to worry about. That could be recession, wars, pandemics, and loads of other events.

There will always be volatility as well. Markets will go up long-term but will fall loads of times, and nobody can predict when those events will occur.

Those who do predict one correct market fall got the last five (or more) wrong!

The bottom line, as he says, is that your stomach is more important than your brain when investing. If you have loads of knowledge, but can’t handle volatility, you will do badly.

If you know enough or have somebody advising you who does, and never panic, you will do well long-term in investing.

This time is never truly different unless we have a nuclear war

It is just that the media makes more money from making sensationalist predictions (clickbait) than telling people to stay the course.

The founder of Forbes admitted as much in the revealing quote below:

Just get out of cash, stay invested, be long-term and diversified, and so on.

That has always worked.

What are the best return investments that use compound interest?

These investments use compounded interest/dividends/coupons in addition to capital appreciation:

1. ETFs and funds
2. Some individual shares, but with extra risk than funds
3. Good quality corporate and bond governments, even though the returns are lower.
4. Real estate investment trusts (REITs)
5. Direct real estate.
6. High interest savings accounts, but these days, few are high. That might change one day.

Would you rather have 1M in cash now or 2M in stocks that you couldn’t sell for 5 years?

Of course 2m in stocks, but 1m in cash would earn 1% per year on average (at most).

So, you won’t get to 2m in five years with cash in the bank, and the risk is indirectly higher. Many people have lost money in cash to inflation, whereas the market has always came back.

The exception is in individual stocks. I would prefer to have 1M in cash than 2m in one, high-risk, small-cap company, or even four…….unless I knew the company very well.

But 2m in ETFs or funds vs 1m in cash? Easy. 2M in ETFs or funds.

Pained by financial indecision? Want to invest with Adam?

Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.