Is Uncertainty Bad?

There continues to be volatility in the markets around the world. The fight in Ukraine has good news then bad news then good news…. The fight in Gaza also has its ups and downs. Even the fights we have been experiencing internally have been volatile.

Asset Allocation on Wikibook
Asset Allocation on Wikibook (Photo credit: Wikipedia)

With all this volatile news what should an individual investor do? Go to cash? Buy gold? Buy real estate? What asset class will perform best over the short term? No one can consistently predict what the markets will do.

When analyzing this there are two groups of people, those who don’t where the market is going and those who don’t know they don’t know where the market is going.

No one knows if the next 20% movement will be up or down, but the next 100% movement will be up.

That said, markets fluctuate widely in the short term.  Fortunately, every major crash has a recovery, with stocks regaining all of their losses, given enough time. The average U.S. recovery from a 10% or more down turn since 1946 has been 111 days.

Similarly, while the stock market has seen many 100% gains, it has never suffered a 100% loss.  Arguably, only a global catastrophe such as nuclear war, asteroid collision, or other extinction-level event could cause such as disaster.  In that case, your portfolio would be the least of your worries.

Free markets will prevail.  Capitalism will prevail.  To succeed in investing for the long term you should own equities…..globally diversify…..rebalance.

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