Sterling Invest

Why we invest in shares and the stock market

We believe the stock market is an investment in human ingenuity. It is a bet on the continued progress of humankind and the future being better than it is today. It allows anyone to invest alongside the most intelligent minds in the world (and their related businesses) as they innovate and grow. We believe investing in the stock market is the most passive and efficient way to own slices of these businesses and profit from their long term success.

Some people compare the stock market to a casino. We fervently disagree with this. In a casino, the odds are stacked against you. The longer you play in a casino, the greater the odds are that you’ll walk away a loser, based purely on probabilities. It’s just the opposite in the stock market. History has shown the longer your time horizon in the stock market, the better your odds are of achieving top investment returns.

The stock market is fuelled by differences in opinions, goals, time horizons and personalities of market participants over the short term but economic and business fundamentals over the long term.  At times, this means share prices overshoot to the upside and go higher than fundamentals would dictate. Other times, share prices overshoot to the downside and go lower than fundamentals would dictate. The biggest reason for this is because people collectively lose their minds sometimes when they come together as a group (herd mentality). As long as markets are made up of human decisions, it will always be like this. 

If there is an ironclad rule in the investing world, it’s that risk and reward will always and forever be attached at the hip. If there were no risk, there would be no wonderful long term returns. And because there is risk involved in owning shares, your returns can vary widely,  depending on when you invest. The good news, the longer your time horizon, the less volatile investment returns become. This is the beauty of compounding. Even the worst 30 year return achieved by global stock markets over the last 100 years would have resulted in an 850% return (more than 8x your initial investment), far outstripping returns generated by most other investments.