News headlines can be depressing and can often give you yet another reason to feel pessimistic about the future. From climate change to trade wars to brain drain, there seems to be a never-ending cycle of negative stories to draining all the enthusiasm out of you.
Why is all the news so grim? Partly it’s just how we’re wired – we’re naturally interested in learning how to avoid threats. Bad news gets more attention than good news. Any financial YouTuber will tell you that scaremongering thumbnails like ‘Why the market WILL crash THIS YEAR!’ get far more clicks than positive thumbnails like ‘Renewable energy boom continues’.
It’s enough to make you want to put your money in the bank and never take a risk. But that will cost you. As American tech exec and investor Nat Friedman put it: “Pessimists sound smart, optimists make money.”
Sitting on the Sidelines is Risky
Avoiding threats has kept humans alive for millennia. But in the modern world, filled with an endless stream of alarming headlines, all we hear about is negative news. This makes it hard to have the confidence to invest for a brighter future. Every investment comes with risk, from share market crashes to potential tenancy problems with a rental property. If you think too hard about the potential downside of an investment, it’s easy to talk yourself into believing the risk is too great.
For pessimists, the answer is to avoid certain investments, or even avoid investing all together. After all, if you think the world is collapsing around us, why bother investing for the future at all? Instead, you can do nothing. You can put your money in the bank and leave it there. It’s about as safe as it can be, your balance won’t fall by even a single cent, and nobody will take it away from you. You can sit on the sidelines, congratulating yourself every time there’s a market downturn. You’ve avoided risk and you get to feel clever – you knew things were going to hell in a handbasket!
Despite the enjoyment you might feel at being right, being too pessimistic to invest means you face another, quite likely, risk: the risk of not having enough to enjoy your retirement. Fearfully avoiding all risk means your money won’t grow. It will be eroded by inflation and you will miss out on enormous potential gains.
Human Progress Drives Growth
Investment is the best and most reliable way to grow your wealth. Over the long run, the share market keeps going up and house prices keep steadily rising. Why does this happen? Human progress.
Humans are incredible. We have an astonishing ability to solve problems, improve productivity and raise our standards of living. It might feel as though the world is getting worse all the time. But in fact, in 1820 around 75% of the world’s population lived in extreme poverty, and that number has fallen to just 10%. Global literacy has risen from 12% in 1820 to 87% today. For most of history, around 50% of newborns died; by 2020 that had fallen to 4%.
This is the result of economic growth, technological advancement and more goods and services available to more people. It leads to industries growing, businesses booming, and a steadily rising stock market over time. Asset prices increase, wages rise, and wealth grows. If you have faith in the ability of human to keep innovating and striving for more, then you should be optimistic about the future.
Instead of reading all the negative headlines, try taking an optimistic perspective. The world is gradually improving, humans are amazing, and over time the share market will keep rising. Don’t miss out – you need to be in the markets to benefit from them, so take action, make a plan, get advice… Just don’t sit fearfully on the sidelines.can be depressing/