It Is Prediction Season…

This bears repeating as the predictions are coming fast and heavy. They include a service that says based on Elliott wave principles the S&P500 will fall to 2700 soon, currently around 3100. Morgan Stanley predicts the rough 2020. Many investors I talk with are saying the market is high and due for a decline.

A few years ago, John Bogle, inventor of the index fund and past chairman of Vanguard Investments was speaking at an advisor conference. Now 80+ years young, Mr. Bogle, shared the best investing advice he ever got while a young man working as a runner for a brokerage firm, a fellow runner, about the same age as Bogle is now told him the secret ‘Nobody knows anything’.

During his interview Mr. Bogle warned attendees that “we give too much credence to past returns; past is not prologue,” saying instead “it’s the source of the returns” that is more important. He then quoted Samuel Taylor Coleridge that history is like “a lantern on the stern, which shines only on the waves behind us.”

Discussing investing opportunities, Bogle pooh-poohed private equity, saying that there are “a lot of sellers, but not many buyers.” He still believes that “performance chasing” is one of the most deadly of investing sins, that “I grow more concerned about target-date funds every day,” is skeptical about 130/30 funds–“it’s not that easy”–and on exchange traded funds, “my skepticism is increasing,” saying that his reading of the data shows that “ETF investors do badly relative to mutual fund investors.”

The problem is not the product but the investor. They need a coach to guide them through the maze of financial media and hype.

Basically what Mr. Bogle is saying is that stock picking, market timing and performance chasing do not work. Developing a customized portfolio, with regard to your comfortable risk level, using a scientific approach and remaining disciplined will maximize your opportunity for a successful outcome.

Remember at any one time there will be an asset class or stock picker or market timer or hot strategy or……..that is outperforming. Successful investors are not always right. They have an investment philosophy that they believe in and stick to it.

My clients understand this and will succeed in the long run. We must remain diligent and stay focused. Own equities…… globally diversify…..rebalance.

Leave a Reply

Your email address will not be published.