Markets are Random …..Get Over It!!

I just read an article that many Americans are afraid of stocks. They are afraid they will lose all their money. Many expect to earn stock market returns with treasury bill risk.

Many investors I talk with each day have different reasons for not investing in the equity markets. Including ‘the market is at an all-time high of 21,000 that is too high’.  Or ‘I am about to retire and I cannot afford to take a loss in the equity markets’.

These investors believe equity risk is their greatest risk. In fact, it is inflation risk that is their relentless enemy. They need to at least maintain the purchasing power of their money. This is best accomplished with equities.

Then there are those that believe there is someone out there who can and does know when to get in and out of the market to maximize return and avoid all losses.

After two decades of research I can tell you this person does not exist.  You will find someone who makes a correct prediction. The problem is there is no evidence that their predictions will be correct going forward.

For example, the market crashed when there was a terrorist attack just three years ago. Over the last two months there has been terrorist attacks in the United Kingdom and the markets barely moved.

Like I said random and unpredictable.

You cannot consistently predict market movements based on past events. There rarely is any cause and effect that repeats.

If you invest in stock markets no one can predict “save” you from the down periods—NO ONE.  If markets were not random and unpredictable, they wouldn’t offer higher expected returns.

Markets randomly and unpredictably go up and down.

Perhaps we should have faith in the free markets and allow them to work. And worry about something fun like ‘will it rain this weekend?’ Or ‘Will my boat start?’ Or ‘ how will I clean up the huge tree that this weekend storm took down? Or ‘Why can’t the Brewers win a close game?’

As we age our situation gradually changes from growing our money to taking an income stream that keeps up with inflation. To succeed in this, we must reduce the level of risk in our portfolio as we grow older.

We will succeed in our investing when we own equities, globally diversify and rebalance.

That if we fire our broker/agent and hire an investor coach/fiduciary adviser.

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