Maybe I Should Market Time..Because This Time Is Different!

Last week there was a horrible attack in Orlando by a terrorist. Or should I say by a coward? There has been and will continue to be speculation that other attacks will occur here in the U.S.

More bad news, there will be a vote in England this week that will determine whether England will leave the European Union. It’s even been given its own name. ‘Brexit’.

English: Randall Building, 535-565 West Georgi...
English: Randall Building, 535-565 West Georgia Street, Vancouver, British Columbia, Canada. Built 1929. Named for the S. W. Randall Company, a brokerage firm. Architect: Richard T. Perry. The 1991 renovations were designed by Blewett Dodd Ching Lee, architects. (Photo credit: Wikipedia)

There are those that believe that the markets will go down as a result and we should exit the market. At least until things calm down.

Since there are over six billion people on this planet. There is always conflict and adversity somewhere. And there always will.

During these times of crisis we have a tendency to make emotional decisions. Decisions that are NOT in our own best interests.

Ideally, we should all just time the market cycles and only buy when the market is low and sell when the market is high. Unfortunately, few, if any investors are able to do this with any degree of consistency.

We tend to make our investment decisions based on recent past events and how we feel about those events.

If the market has done well lately, we wish, we are comfortable buying stocks. If the market has done poorly, however, we avoid them. Unfortunately, this is the exact opposite of what we should do if our goal is to maximize our long term return.

Once we feel “comfortable” with the market, we have usually already passed up large potential gains.

There is an unholy alliance between the media and the large financial institutions to convince the investing public to continue trading by spreading fear and panic.

Many investors mistakenly believe that the big brokerage firms make money by trading in and out of the ‘right’ investments

The large financial institutions actually make money when YOU trade in and out, making money on every trade.

I personally worked for a large brokerage firm that paid its advisors a greater fee for the equity portion of the portfolio than the bond portion.

Largely because the firm made more money on equity trading fees.

Since the advisors were paid more for the equity portion, there was a tendency to increase the equity portion of client portfolios. Thereby increasing risk.

This practice of paying more fees for equity positions will be changing with the new fiduciary rule taking effect in 2017. At least for retirement accounts that is.

Will these large brokerage firms find new ways to generate more fees?

You should own equities…globally diversify…rebalance and believe that America and the capital markets will prosper. We as a country have been thru much worse and we recovered and became stronger.

The problem is no one can consistently predict what will happen and when.

During times of crisis should we cut and run or should we stand and fight? Historically the fighters are the ones that profit and prosper. Those that cut and run grasp unto their ‘guarantees’ and wonder why they are always behind.

To best deal with the inevitable ‘bad’ times fire your broker/agent and hire an investor coach/fiduciary adviser. Keep in mind a fiduciary adviser did not need a new regulation to keep your best interests first and foremost.