To some investors, the past few weeks in the market foretell coming doom and gloom. After all, there are dozens of big worries that the market has to overcome. The looming debt crisis, China trade policy, Federal Reserve policy, climate change, Trump, Congress, oil prices (either too low or too high), interest rates, inflation, immigration, and numerous other fears are on the horizon (or so the media talking heads tell us). To some, the weight of all this appears to be insurmountable.
It’s important to remember that while the exact scenario may appear unique, we have been here before.
The Straw Man Strategy
Investing is by definition a long-term exercise. Since investing is based on what happens in the future, there are always uncertainties, there are always fears.
But you cannot allow straw man arguments that dominate the daily news to govern your investing strategy. These type propositions that are presented every single day in the media are intentionally misleading and often of their own construction. These fallacies often play into the emotions of investors looking for reasons for market drawdowns. With all this as a backdrop, it is easy to allow short-term thinking to override long-term investing policy.
Investing on Purpose
Some of the emotion can be neutralized by understanding that the innate purpose of investing is not to optimize or maximize returns. Rather, the purpose of investing is aimed at achieving very specific long-term goals and outcomes that are important to you. The entire breadth of investing misinformation that is spread by the financial media each day has nothing to do with your particular long-term goals.
Financial markets rise and fall often without any reason at all. Millions of market buyers and sellers across the globe process all the information available and make their own determinations of value at any point in time. Usually these determinations have little or nothing to do with the laundry list of worries mentioned above.
The Prediction Season
This is the time of year when countless predictions about what will happen next year abound. Remember this...the track records of most of these prognosticators is worse than a coin flip. Yep, they don’t know anything about what will happen (and they can’t).
Your financial future largely depends on how you can control your emotions and that depends on how well you block out the media noise. Remember, they are mostly concerned with their 30-minute TV program while you are mostly concerned about the next 30 years of your investing life.
Start the year off right. Avoid the straw man strategies, silence the noise, and follow the evidence of the markets. Start there. Ready for a real conversation?