08 March 2024

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Wait for the perfect opportunity and you'll miss many good opportunities

Luigi Campopiano

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Michael Dell, founder of the eponymous computer company, encapsulates in a few words an extremely important concept in the field of investments: "Often over the years, I've spoken with people who, perhaps frightened by the market's performance at that moment, have postponed potential investments because, they said, it wasn't the right time."

As we all know, 2022 was a challenging year due to the sudden restrictive monetary policies of central banks: financial markets suffered greatly, closing the year with a double-digit negative result for both stocks and bonds, a level of intensity not seen in many years (at least since 1969).

But when is the "right" time to invest? When are those risk-free conditions present that allow one to invest their money without having to endure the typical volatility of the markets? Many savers have memories of a sort of golden period for investments: the '70s and '80s when one could buy a Postal Savings Bond or a Treasury Bond and wait for the maturity after 10 years to see their savings grow, without worries or anxieties (with "certain" returns and no surprises). However, today, 80% of those surveyed find managing personal finances complex and anxiety-inducing (source: as also reported in the "Report on the investment choices of Italian families"). Yet, it's worth noting that in the '70s/'80s, inflation in Italy didn't drop below double digits from 1973 to 1983, peaking at 24% in 1974.

This desire to eliminate "risk" (i.e., volatility) from investments is incompatible with reality: volatility, which savers perceive as "risk," is an inherent condition of investments that can only be mitigated by two factors: diversification and time.

Returning to the famous "right moment" to invest, when these ideal conditions for investing supposedly exist? Never and always: never if you think of investing only when you can do so without taking risks; always if you accept that volatility is part of the investment process.

Because managing savings is a complex matter, people look for shortcuts to seemingly simple instruments that offer peace of mind (e.g., bonds: in 2022, the average return on these instruments was double-digit negative). Are we sure that what seems safe on the surface is truly safe?

Why invest in individual securities, assuming specific risk (even if sometimes minimal), when I can buy hundreds of issuances with the same amount through an investment fund, diversifying among different issuers and achieving similar if not superior returns?

Oh, I forgot: regarding specific risk (often underestimated), one of the inserts in Il Sole 24 Ore's Plus section recalls the story of Italian savers involved in purchasing Portugal Telecom bonds (only to find out they held a Brazilian bond that defaulted later). Often, absolute returns can be a source of trouble.