During 2012 we were worried about several things that would have a negative impact on the financial markets. The financial media made sure you were fully aware of these ‘events’. After all, the media’s strategy is, if it bleeds it leads.
Below is a list of the things that did not happen in 2012.
- We did not fall off the fiscal cliff.
- The euro zone did not fall apart.
- China’s economy and stock market did not crash.
- The bond market did not implode.
- The re-election of President Obama did not derail the U.S. market.
- Doomsday did not arrive on December 21, as the Mayan calendar may have suggested.
Given these possible events the stocks around the world had a solid year in 2012.
Many of the people I talk with remain pessimistic about the future. What if this happens or that happens? They ask. I’m not sure what will happen either short or long term. What I do know is that things will change. The only thing that doesn’t change is that things change.
Rather than trying to predict the future, which no one can consistently do, I follow my investment philosophy, which is that markets are efficient. In that all the knowable information is in the current price of securities. Any predictions made are a guess. The markets going forward are random.
I believe that free markets work. I believe that economies around the world will continue to grow. What I do not know is what sectors or industries or products will grow.
Therefore we must remain diversified and disciplined.
There will always be short term volatility. My role as an investor coach is to keep investors focused on the long term. Trying to time the markets or pick the right stocks will lead to poor results, long term.
Your goal as an investor is to reach your long term goal. This is not done by earning the highest return possible. Earning the highest possible return can be accomplished in the short term, however it cannot be accomplished long term.
UNLESS, you believe that earning the market rate of return is the highest possible return.
The markets may not be perfectly efficient at all times, however they are far too efficient to take advantage of and improve returns.
Let’s reduce your anxiety and improve returns, long term.
To succeed long term you must own equities..globally diversify..rebalance.