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, investors are unable to do this with any consistency. Whether professional or amateur.
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, (like we are seeing now) 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.
Stocks are the only thing people will not buy at a discount.
The stock market is forward looking and usually starts trending upwards between 6 to 9 months ahead of the economy actually recovering from a down cycle.
Remember, Warren Buffet is a buyer and NOT a seller.
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. The large financial institutions make money when you trade in and out, making money on every trade. The media encourages sensationalism because it sells advertising.
You should own equities…globally diversify…rebalance and believe that America and the capital markets will recover. We as a country have been thru much worse and we recovered and became stronger.
Not all sectors of the economy will recover or come back to where they were prior to 2008. Other sectors will recover quickly and new sectors will emerge and thrive. The problem is no one can consistently predict what will happen and when.
The world as well as the equity markets are constantly evolving. Things never stay the same. At one time, Xerox was a great company with great innovative products. Now they are almost irrelevant. Or Kodak, or Blockbuster, or the ‘Buggy Whip’. There are technology advances everyday which replace products that were once considered irreplaceable.
Out with the old and in with the new.
No one can predict when any product will be replaced. Or when any company will become irrelevant. No one can predict the future with any degree of consistency.
Nearly all investors require the assistance of an investor coach/fiduciary adviser to guide (coach) them thru the down markets. As well as keep them in check during strong up markets in any specific asset class. Your coach will provide you with the discipline to keep your eye on the long term.
Your coach will help you avoid making decisions based on your emotional response to short term volatility.
Your coach will help you build a prudent portfolio designed for YOU. Your portfolio will have a level of risk you are comfortable with.
Remember without risk there is little or no chance of reward.