The blog post title may sound a bit controversial, but there is an underlying reason why I stated it. This mental conclusion stemmed from my numerous conversations with family members, friends, acquaintances and colleagues on overcoming their inertia to invest. From these encounters, the most common concern is about the riskiness and volatile nature of investing, from which some have had heard from their social circles and/or (surprisingly) television series depicting the dramatic rise and fall of characters engaged in the markets.
It is acknowledged that investing involves risk, but if the risk is managed and reduced, it is not so much of a biggie after all if we know the reasons behind them.
Picture generated by Gemini
The Basics: Why Start Investing?
While there are a few major objectives on starting an investment portfolio, the most common reason is to build a sizable one that could see through an investor’s retirement years. Unless there is a lucky break or the happenstance of selecting the right stock/sector/financial instrument (glancing at Nvidia and Bitcoin), such a journey would take at least a few decades, enough probably to cover a person’s working life.
And along this road, one may see through a few economic and market cycles; a person who started working in August 1996 and recently stepped down in August 2026, a period of 30 years, would have gone through the Asian Financial Crisis of 1997, the Dot-Com Bubble of 2000, the Global Financial Crisis of 2008 and the COVID pandemic of 2020, not to mention the smaller ones which barely register in my head at the moment. Yet the markets are still chugging along, with the S&P 500 returning an average annualised return of 10.44% nominal and 7.703% real (both with dividends reinvested)1.
The Hidden Danger: Inflation
There is another underrated reason on the need to invest, and it tends to be mixed into or hidden from the main narrative, and that is inflation. I could probably state that the consideration of inflation is more of an “unknown known”: it is there, but for a few people, through some psychological bias, chose not to pay attention to it.
There was an interesting discussion that I had with a colleague a few years ago along the lines above; he shared about the tax savings on transferring part of his income to the Supplementary Retirement Scheme (SRS) account, but he remained adamant on not investing his SRS, citing his fear of risk and “dunno anything” about investing, despite me telling him that inflation is eating into his SRS monetary value. He just felt safe that his monies are still there in the bank, even though it is earning just 0.05% interest per year. His concerns are understandable, but the alternative has its own silent cost.
Bringing the Two Together
By now it is obvious where this discussion is heading, and why the blog post title. Investing, in its most basic aim, is to outrun inflation down the years to whatever objective the portfolio is for. To achieve this, some risk needs to be undertaken, and volatility needs to be accepted, which brings us to the next adage one often hears about: high risk, high returns; low risk, low returns.
However, embracing risk does not mean letting one be led by the nose with it; rather, it is to know that it exists and learn to mitigate it. This applies to everyday life, too, where I do not just cross the road with my eyes closed. I reduce the risk of being knocked down by looking left and right, and the chances will lower further by using a pedestrian crossing, though it will not go down to a complete zero.
In investing, the main defence against risk and volatility is diversification, first by asset classes, then by regions/countries, and then by sectors/industries. Sure, this action does not eliminate the two variables, but at least it gives us an assurance from the possibility at the other end, i.e., a complete wipeout.
Going back to the example of the 30-year investing journey, and the message is clear: ups and downs are common along the way, but eventually the returns come out positive overall, and more importantly, beat the inflation rate. For the said average annual returns above, the nominal number is 10.44%, and the real number, which in economics lingo meant “after factoring inflation”, is 7.703%.
The numbers for yearly inflation in the United States (cited as I had used the S&P 500) and Singapore (for a local context) for that three decades stood at around 2.58%2 and 1.68%3 respectively; that 0.05% interest sitting in the bank is not going to cut it.
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1 – Mitchell, Cory. Historical Average Stock Market Returns for S&P500 (5-year to 150-year averages). TradeThatSwing. 14 Sep 2026. https://tradethatswing.com/average-historical-stock-market-returns-for-sp-500-5-year-up-to-150-year-averages/?srsltid=AYCX9vKKaVvjXgIw6gOS0urGmAPpreSh-wHwY8rEus02UNeTMI9I70-a (accessed 25 Oct 2026)
2 – CPI Inflation Calculator. https://www.in2013dollars.com/ (accessed 25 Oct 2026)
3 – Lim, Abram. Inflation Rate in Singapore: Current, Average & Historical (2026). Smartwealth. 29 Sep 2026 https://smartwealth.sg/average-inflation-rate-singapore/ (accessed 25 Oct 2026)
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