Every day investors ask me what to expect from the equity markets. And every day I tell them that I do not know what will happen in the short term. But the equity markets will do well over the long term. Many people are asking: is now a good time to buy or is it a good time to sell?
I addressed this a short time ago but I feel it is needed again.
There is never a shortage of predictions on where the markets will go next. These predictions are typically based on current events.
Who will win the presidential election?
How will the crisis in…well you name it affect the equity markets?
Will inflation take hold?
Will interest rates rise?
And the list goes on and on…
The talking heads on television need these predictions to keep viewers watching, which in turn increases advertising revenues.
Everyone wants to know what will happen next. In many cases, we make emotional decisions based on the latest short term predictions. These decisions will in most cases result in very disappointing performance.
If you wish to succeed long term in reaching your financial goals, you need to develop a prudent strategy and remain disciplined to that strategy. Most important you must have realistic expectations.
By developing a prudent investment process and sticking to it. You will realize a successful investment experience. This means at times not performing well compared to others.
You should know the expected return and the expected volatility (risk) for your portfolio. Without this information you will be gambling and speculating with your money.
The point is a prudent process and discipline will lead to successful long term results.
Proper expectations are the key to investing with Peace of Mind.
Do not expect to predict or forecast stock prices and movements.
Do not expect to pick winning stocks and beat the market.
Do expect to achieve close-to-market returns over time and to see daily, weekly and yearly volatility. Reduce your costs, use diversification, and sit tight.
If you expect the impossible you will be frustrated, unhappy and fearful.
All of us would like to get rich quick. However, if this is your strategy, odds are you will be very disappointed. As I mentioned earlier, develop a lifelong game plan and stick to it. The only adjustment you should make is to gradually become more conservative as you get closer to and into retirement.
To succeed in reaching your long term financial goals you should:
Own equities….globally diversify….rebalance.
Leave the predicting to the talking heads and if you do watch see it as entertainment, not strategy.
“DISCIPLINE is the soul of an army. It makes small numbers formidable; procures SUCCESS to the weak, and esteem to all.” -George Washington