How to get back to stock market

Question

I've been following this site regularly and I try my best to follow advice that's published here. I think I'm a reasonably skilled investor and I honestly don't try to outsmart/time the market. I'm non-US and I had a reasonable portion of my savings invested in dollar based stocks. Couple of years ago my country's central bank decided to fix our currency to euro and then roughly 3 years ago they announced they would stop the intervention. The general expectations were, that the currency would get stronger by 15%, which would effectively mean a clean loss for me. The market seemed to be at its peak back then so I decided to pull out the money from stocks back to my currency. In retrospect it was not a good move as the end of intervention had smaller effect then anticipated and I missed the gains of last ~3 years.

So I have two questions:

• What I should've done differently back then (I guess I should've hedge against the currency risk and keep the stocks?)
• My assets have been sleeping on various low interest savings accounts. How to get back to market - especially now when the talks of recession are all around. I really feel uncomfortable to invest big sum to stocks at this climate

Answer 1

There are always people that talk about an upcoming recession, and there are always people that talk about upcoming economic booms. Looking back in time, the number of people on each side are indicator for the opposite (so the more people claim a recession is coming, the lower the chance it is true). That should tell you the value of those people's statements.

Learn about risk and return of different asset classes, and find your peace with a point on the scale. Then buy some ETFs in the class you chose, and don't watch them.
Listening to warnings in the market is 'trying to time it', it is overall counter-productive, and will lose you money. Just relax and wait.

Answer 2

Stocks are a form of real investment, much like real estate and forest. Unlike nominal investments like bonds, real investments like stocks, real estate and forest are not affected by currencies. (Well, you could argue that some financial stocks like banks might be a bit different, closer to being nominal investments than real investments.)

Consider if you have accumulated 100% inflation, i.e. all prices have been doubled. The salaries have been doubled as well. Guess what, the profits of the company you own have been doubled too.

Now consider that you own local stocks. The local currency weakens. You might think that owning global stocks would be better because the global currencies have strengthened. Well, not. The competitiveness of the local companies as a result of local currency weakening will improve, directly benefiting the companies and thus the owners of the companies.

Stocks have a built-in protection against currency fluctuations and inflation.

My advice? Get back to the stock market, and never get out of it unless you really need the money for other purposes. How you want to do it is up to you. You could consider it good risk management to purchase the stocks back over a 1-year or 2-year period or so, instead of buying all at once, but that would reduce your expected profits, so I'm not saying purchases over a period of time are better than purchases immediately.

And, stop worrying about currency fluctuations, inflation, etc. Stocks, as a real investment, are inherently protected against such things.

When getting back to the stock market, keep in mind low costs and diversification. Those are the only two free lunches in investing.