On the 9th of March, 2009, we saw the ...

Large companies can’t be both greedy and risky

On the 9th of March, 2009, we saw the share-market hit rock bottom. The ASX in Australia (the largest 200 companies) and the S&P 500 in the States hit their lowest point – down 57% since 2007 (before the GFC began).


Since then, of course, the markets have recovered. In fact, there’s been around 17.5% compound growth each year in the US.


Again, in March of 2020, the markets were down by 37% due to the worldwide pandemic. At the time of writing, October 2021, with dividends reinvested, the ASX 200 is up by 68%.


What’s the point in all this? The point is that we are talking about significant returns. These returns are driven by companies making profits.


We often hear people complaining about big companies making large profits. Greedy money-makers are what some people call them. And these same people also say that it’s too risky to invest in the share-market.


So which is it? It can’t be both. Companies can’t simultaneously be greedy AND too risky to invest in. Because if they are greedy, and making cash, that only drives the market up. The argument makes no sense.


Yet many believe it is not safe to invest in the sharemarket. And yes, we know there is volatility – but it’s the only way we have seen clients reaching their goals financially. No asset class compares to it.


Companies grow and improve by reinvesting some of their profits from the previous year back into the business. And by owning a share of these companies, we can get great returns over the long term.