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Why you should invest in the sharemarket?

To grow your capital at the fastest rate - capitalise on the 8th wonder of the world "compounding". We expect to double your money every 7-10 years and have 50 times your money after 50 years. This allows you to enjoy a more comfortable lifestyle and retirement or even early retirement

To generate passive income - that is likely to grow even if you spend all it generates each year

To free up your time - simply invest and walk away unlike other investments such as private businesses or property

Whats the catch?

There is risk to your capital when investing in shares, and it is significant in the short-term.

The risk is selling your shares in the future for less than what you paid (plus all costs).

Like all assets, share prices fall regularly due to a multitude of factors, most of which are short to medium term in nature. Some we can control but most we cannot (such as health pandemics, weather events, changes in political policy, oil supply, and geopolitics).

How do we reduce the capital risk and benefit from the growth?

We can reduce the risk significantly using two strategies:

1) Invest for the long term being at least 10 years

As depicted in the graph to the left as time increases returns become much less volatile with 30-year S&P 500 returns being reasonably constant at about 7% or doubling your money every 10 years.
We also choose to select a portfolio of companies that are not a simple index so that we have the opportunity to capitalise on our research of great companies and market irrationality (as below).

2) Monitor markets and act opportunistically

By monitoring markets and valuations, we can opportunistically take money off the table when we believe companies are overvalued and add money when we believe companies are undervalued.
This is an attempt to capitalise on what we call the pendulum effect of herd behaviour. Sentiment often swings between too optimistic (we should sell) and too pessimistic (we should buy).
We may not act on this for years and in some years, we may act multiple times. We cannot predict this, it will be determined by irrational behaviour in the market..