In the famous Christmas movie, “It’s a wonderful life,” the evil land baron Mr. Potter seeks to further enrich himself by monopolizing the real estate market in Bedford Falls. He does this by sowing seeds of fear about the stability of the local Savings and Loan, while planting ideas that home ownership is too risky and complicated for uninformed individuals to get involved in. If he were to get his way, no one but he would own any real estate, the rest being lifelong tenants subject to regular rent increases and with no chance to benefit from home ownership. In such a world, Mr. Potter’s wealth would continue to increase while everyone else would be left behind. It is a sad tale because one of the economic principles upon which America was built was the idea of private property ownership. It had long been the case that “he who owned the land made the rules,” so in America our founders determined that all should have the opportunity, or the dream, of private property ownership and thus by continuation, all would have a voice in making the rules.
Though Mr. Potter’s character may be a bit exaggerated, still there are lessons to be learned here that apply to other areas of life and investing. Consider first that the realization of Potter’s dream is dependent on his creating in the minds of the citizens of Bedford Falls a sense of fear about the future and uncertainty about their ability to manage it. This fear leads to poor decisions and a willingness to give up on one’s own dreams in exchange for what they perceive as more security. In modern days there is a sales tactic known as FUD – which stands for Fear, Uncertainty and Doubt. The theory is that a person who is fearful in the present, uncertain about the future, and doubtful of their own abilities, will be easier to persuade to do something that may be more in a salesman’s best interest than their own. This common sales tactic is also a key tool used by scam artists to steal your money. Though it is prudent for an advisor to warn you of the risks of investing, you should be careful and maybe even suspicious of those who spend too much time on the negative. Given the long-term track record of the stock market, which so far has recovered from all dips, drops and crashes, it would seem odd for someone who understands it to be constantly criticizing it as an investment tool.
I heard several interesting comments from people following the 2008 market crash that were similar to one I heard just last week. It went like this when a man proudly said, “I got out of the market right before the 2008 crash when (named a product salesman) warned me,” to which he was asked, “When did you get back in?” His answer, “2023.” A quick look at the market graph from 2007-2023 shows this man’s exit was a short-term victory but a terrible long-term decision. But he fell victim to a salesman spreading FUD to sell his products, and the result was 15 years of missed opportunity.
In many ways Mr. Potter was right. The world was in a mess. The country had problems. The war was brewing, and trouble abounded. So, the FUD that he spread was based on many truths. But what he failed to tell his victims was that he personally believed, in the long run, that investing in Bedford Falls was a great idea and one he was willing to bet his fortune on. I have found the same to be true of the stock market in general. There are always problems in the world and always reasons to be worried. But taken as a whole, over many years, the results of investing wisely in the good corporations of this country has shown again and again to be a profitable idea. Just look at any 20+ year graph and you will see that the dips, drops and even crashes of the stock market, over time become little blips on the screen of a generally upward green line. Now there is no proof this will always continue but given what we have overcome in the past it seems a wise course to judiciously use the stock market as another tool in our long-term financial plan, approaching with caution to the FUD so many salespeople spew.
Dan Wyson, CFP® is a long running national financial columnist, author of several books and CEO/Founder of Wyson Financial/Wealth Management 375 E. Riverside Dr. St. George, UT 84790 – 435-986-9525 Securities and Advisory services offered through Commonwealth Financial Network™, member FINRA/SIPC, a registered investment advisor.