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There is no perfect time to invest, so seize the day

For those who have a mind to find one, there is always a rea..

For those who have a mind to find one, there is always a rea..

For those who have a mind to find one, there is always a reason not to invest in the equity markets and yet, remain forever in cash and over the longer term you are likely to be materially worse off.

Everything in life, as Albert Einstein knew, is relative – even the threat of nuclear attack.

None of what follows, we should immediately stress, is to downplay recent suggestions North Korea may have more nuclear weapons than previously thought or to dismiss the potential threat under which many people in Eastern Asia consequently live.

We would simply point out some of the big issues humanity faces today are hardly new.

Threats to humanity are not new

Fans of Dan Carlin’s excellent Hardcore History podcast will already be aware that, scary as they may be, the projections North Korean leader Kim Jong-Un could have up to 50 nuclear weapons at his disposal by the end of this decade do gain some perspective when you think about the arsenals with which the US and the USSR were threatening each other during the 1950s and 1960s.

To offer just one example, consider the largest ever man-made explosion – the detonation by the Soviets of the so-called ‘Tsar Bomba’ hydrogen bomb 56 years ago this month.

That was a 50-megaton device – the equivalent yield of 50 million tons of TNT – which was only scaled back from 100 megatons as it was felt that at least gave those in the aircraft dropping the bomb a 50/50 chance of survival.

In the end, despite the huge shockwave that resulted, Major Andrei Durnovtsev and his crew landed safely after delivering a bomb that produced a fireball 40 miles high and visible from 1,000 miles away.

If you want an idea of the damage a nuclear explosion that size would have caused, there is a fairly sobering map on Wikipedia of the extent to which it would have obliterated Paris and its suburbs.

That one explosion was some 420 times as powerful as Kim Jong-Un achieved with his latest weapon and, unlike North Korea, Russia had the wherewithal to deploy its arsenal.

Similarly, there are some terrifying transcripts from the height of the Cuban missile crisis, in which US president John F Kennedy is being urged by some of his advisers to get his retaliation in first.

For the record, the US’s biggest hydrogen bombs had a yield of ‘only’ 15 megatons but, like the USSR, it had a staggering amount of them (at the time of its collapse the Soviet Union had some 45,000 nuclear weapons).

These were all pointed at the other country, offering some four minutes’ warning of an enemy attack – during which time the other side would have to decide whether or not to end civilization as they knew it.

How stock markets coped with the Cold War

The point of all this horror – and we have not even touched on biological and chemical weapons – is to try and add some perspective to the world today.

People can lose touch with just how bad things have looked and been in the past and, simply from an investment point of view, that can lead to them taking – or failing to take – actions that can harm their personal wealth for decades to come.

With the benefit of hindsight, we know that in spite of the extreme uncertainty caused by the nuclear arms race between the US and the USSR, stock markets performed very well – returning an average of 10% a year before dividends from 1954 to 1970 (past performance is no indication of how the markets may perform today of course).

Investors who had instead opted to stay in cash would have seen their savings destroyed by inflation during a period when the S&P 500 index in the US tripled in value.

More recently, those who have wanted to could have seen the financial crisis as a reason not to invest – and then, say, the eurozone crisis and now North Korea.

The reality is, however, that there is no ‘perfect’ time to put money into the stock market and, if you are holding out for one, you are going to remain in cash forever – and, over the longer term, you are likely to be materially worse off as a result.

  • Ian Kelly is an author on The Value Perspective, a blog about value investing. It is a long-term investing approach which focuses on exploiting swings in stock market sentiment, targeting companies which are valued at less than their true worth and waiting for a correction. Get a weekly round-upof the best posts.

Important Information: The views and opinions contained herein are those of Ian Kelly and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The sectors and securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. The opinions in this document include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Registration No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.

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