The first two months of 2016 resulted assets and wealth being transferred from those with no stomach for volatility TO those who can handle it. Many investors panicked and sold their equity positions during our recent downturn.
The doomsayers were coming out of the woodwork predicting the pending doom. ‘Run for the hills” they proclaimed. The market is crashing. In most cases these ‘experts’ had just the product/solution to protect you.
The best strategy for investors is to develop a scientifically backed portfolio, for their risk level and forget it. (I shouldn’t say forget because we will rebalance periodically.)
I recently read about a movement in the investing field. It is called “the Evidenced Based Investor”.
This movement is nothing new. In fact, this is what I have been proclaiming all along.
This ‘new’ movement says ignore the financial media, ignore your friends who found the next ‘get rich quick’ scheme.
There will always be someone who beats the market. Unfortunately there is no ‘evidence’ that that same someone will do it again.
Remember the equity markets are random and unpredictable. That means that stock picking and market timing do not work. It also means that finding a money manager with a great return does NOT mean they will repeat.
Currently there is a cloud of pessimism covering America and perhaps the world. There is also a human tendency to believe that when times are bad they will always be bad and conversely when times are good they will always be good.
Although no one can predict the future, the economy, America’s and the worlds’ will get better, when I don’t know, but it will get better. Do not react to these short term volatile changes.
Remember research has shown that the average investor holds their portfolio an average of three years, much to their detriment.
Following a prudent process with discipline will lead to investing success long term. In most if not all cases this will require the guidance of an investor coach/fiduciary adviser.
The ‘evidence’ is clear.
To succeed in reaching your long term financial goals you should own equities….globally diversify….rebalance.
