By Kuldip K. Ambastha
It is always easy to assume either that things today are not as good as they were in the past or that they aren’t going to be as good in the future. The first is irrelevant, and the second is usually not a good bet. Mankind is pretty amazing at doing foolish things to create problems and then finding brilliant ways to overcome them. I am not unaware of the world’s many current problems, but I am optimistic nonetheless. Pessimistic people always sound smarter than optimists, but optimists generally live in bigger houses. (Thomas Britton [Britt] Harris IV; https://www.ai-cio.com/news/britt-harris-return-on-luck/)
In one’s life, there is space for both pessimism and optimism in general, as needed. That said, on Wall Street pessimism does not deliver as optimism does. A pessimist may hoard money under the mattress, or at most put it in a bank earning less than 1% in yearly interest. A pragmatic optimist, in contrast, may evaluate risk and return, and then invest in a reasonable mix of stocks and bonds. Over the long run (30 years, annualized returns, not adjusted for inflation), stocks will deliver strong returns, bonds will deliver moderate returns, and cash will deliver very low returns. When accounting for inflation, stocks and bonds will likely still deliver positive returns, while cash may not deliver more than the rate of inflation. When investing for the long-term, it is important to be a pragmatic optimist. Pessimism does not pay off.
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