Investors are always looking for the best asset category to invest their portfolio. If only someone could tell them when to buy stocks or bonds or real estate or CDs or annuities or even gold and then tell them when to sell.
The Wall Street bullies want you to believe that this someone exists.
Remember these bullies make money whenever you trade, buy or sell. It doesn’t matter to the bullies whether you make money or not, they just don’t care.
All that matters to the bullies is that you keep on trading.
A number of advisors reportedly predicted the 2008 crash and got their clients out of the market. Unfortunately, for investors, these advisors ability is a matter of luck and NOT skill. Their ability to repeat this impressive feat is virtually zero.
There is no correlation between an advisors’ ability to time the market in the past and their ability to do so in the future.
What these bullies are really telling you is that they can predict the future. They want you to believe they can get you out of the market and buy back in at the right time.
Unfortunately, when you look at their long term results you will realize that they do not beat or even match a prudently diversified portfolio.
Your portfolio is diversified when you own asset categories with price movements that do not mimic each other. Two or more asset categories may both have high-expected returns but perform very differently in the short term. This difference can be measured and used to build a diverse portfolio.
Said another way there is a mathematic and scientific method to develop a diversified portfolio. This in no way involves accurately predicting the future.
This portfolio will be built with your specific risk preference which will help you reach your long term financial goals.
Unfortunately, right now, a globally diversified portfolio does not look like the right thing to do. The performance of a globally diversified portfolio is not looking great. This is where your investor coach earns their fees.
By keeping investors disciplined to your long-term strategy, your coach will get you through these uncertain times.
There is no one strategy that will provide continuous great returns. However, over the long-term you will realize the returns you need for a successful retirement.
Staying disciplined is much more difficult when the U.S equities are outperforming the international equity markets.
As an example, during the mid to late 1990’s these globally diversified portfolios under-performed the U.S. equity markets. In some cases badly under-performed. Remember when ‘tech’ stocks were new paradigm?
Then the bubble burst and those concentrated in the ‘tech’ stocks were decimated. These globally diversified portfolios continued to earn returns. Of course, past performance is no indication of future results. But over time a diversified portfolio has performed very well.
One very important lesson here is that NO ONE can predict the future. Remember the ‘talking heads’ on television have one goal and that is to sell more advertising and keep you trading.
Their goal is NOT to help you prudently invest.
In order to succeed in reaching your long term investing goals you must own equities…..globally diversify……rebalance.