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.
Recently I worked with a prospect’s retirement plan. During our discussion, I learned that during the 3rd quarter they exited stocks and bought fixed income. I learned it was the result of all the media hype on the presidential election.
Many in the media predicted that if Donald Trump were elected the markets in the U.S. as well as the rest of the world would react very negatively.
There was uncertainty in the equity markets and they reacted by running to safety, ie, fixed income. Safety in fixed income is not real safety but that is for another discussion.
This is a classic case of market timing. And market timing has been proven over time to hurt investor performance. And the losses can be significant.
Remember the Wall Street bullies make their money when you trade in and out of stocks. This may seem like control but you are actually ‘out of control’.
To succeed long term and reach your financial goals you should
own equities…globally diversify …rebalance.
