Investing morality.

There are some people who seem to think that there is a moral element in finance. You often hear these folks talk about how "other" people have taken on too much debt, or that the profits or goods they are enjoying are based on unsound economic activities and are too risky. Last week I heard a TV analyst talk about how he is on the sidelines during the current run up in the market, and implied that he will miss the downside. Of course, one would think it would be smarter to simply sell on the way down and pocket profits.

Yes, there is risk in the market and there is a chance that riskier investments will lose money. Of course there is also the chance that they will make money. A few months ago there was a lot of consternation over how the buy and hold investor was not making any money. Of course this depends on the point you started and the point you are at.

Since the late 1990s, the market has gone up to 1500 twice and down well below 1000 twice. If you have been investing money regularly over that period without withdrawal, you probably don't have much of a return. Of course if you started investing 20 years ago, in the late 1980s, you are doing quite well right now. In fact if the market returns to and passes its prior highs, you are still potentially going to do well.

Now clearly, if you have been a little more active and invested more at the bottoms and took some out near the tops you have made quite a bit of money. Simply put, the risk of investing in the stock market is very dependant upon timing. If you have a long enough investment window, it is likely that you will do OK. If you need to take the money out at an inopportune time, you have significant risk and probably should make sure that money is protected.

There is no morality involved in investing. You can of course use your own morality or beliefs to dictate how you invest, but financial decisions don't really care. If you borrowed a ton of money in 1990, bought tech stocks, sold near the top, bought real estate, sold near the top and then bought gold, you would be a very rich person today. The fact that you did it using borrowed money wouldn't really have much to do with it.