Through many discussions with investors I have learned that when things go against them they want to take control.
Stock pickers and day-traders who are actively trading their investments have perceived control over their portfolio. Similarly, people who jump in or out of the market during up or down swings also mistake their activity for control.
In reality, the more activity and trading you generate in a portfolio, the more out of control the portfolio becomes. When an investor trades in their portfolio trying to time the market or find the “best” investment they are doing nothing but add costs and decrease return.
Actively trading your account by picking individual stocks or market timing or picking funds based on past performance is exactly what the Wall Street bullies want you to do.
Stop empowering Wall Street.
Remember, no one can predict the future, no matter how convincing someone is in the media they are only guessing. In most cases the predictions are never broadcast by the same ‘experts’.
The “best” strategy is to have a prudent process and discipline in place Stop trying to study the market to find bargains, statistics prove that it cannot be consistently done. You might get lucky in the short term but long term your results will suffer.
With the case of market timing, getting in and out of the market at the right time requires being right when you get out of the market AND be right when you re-enter the market. This again will result in lower returns.
To succeed long term and reach your financial goals you should
own equities…globally diversify …rebalance.
The problem investors have is that they do not know what long term really means.
Is it 1 year or 2 years or 5 years or ten years? I guess everyone has their own definition. What long term means to me is your entire life. At some point, you will retire and stop accumulating funds. You will begin spending funds. Many believe that when you retire all your savings should be ‘safe’.
What these investors forget about is inflation. What seems like enough money today. May not be enough in 10 years or 20 years.
Let the free markets work for you. Remember since 1926 the S&P 500 has averaged 9.87% return.
Keep in mind this is not an arithmetic mean average but rather the compound average return. You can learn more by going to http://www.investopedia.com/articles/08/annualized-returns.asp
During that time, there has been down turns of 10% or more 89 times. So, if you want to earn the great returns the equity markets have to offer. You need to be patient. It helps to have a coach to help you through the ‘bad’ times.