During many conversations with investors. I have come to realize that they continue to be afraid of the equity markets. They are afraid they will lose all their money.
Many expect to earn stock market returns with treasury bill risk. Many 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 nearly three 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.
Have you ever noticed that the same ‘predictors’ are on the
financial talk shows more than once?
Of course, with the exception of Jim Cramer, who I believe is on for entertainment value. If you ever went back and looked at his picks from the past. You would realize he does not beat the market. In fact, he lags significantly behind the market.
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.
The down markets are short term volatility that we must live with to earn market returns.
The most successful investors have a philosophy they believe in and stick to it regardless of the3 market conditions.
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.
It is also vital to hire a fiduciary adviser/investor coach. Your coach will keep you focused on the long term returns of the equity markets. And ignore the inevitable short-term volatility that we experience in the equity markets.