Where’s the Stock Market Going? (Part 1)
I get asked this question a lot. And it’s a reasonable question. Either because the questioner believes that a political/socioeconomical crisis is brewing somewhere in the globe, or natural disaster just happened, or because this or that Head of State said X or Y, or simply due to curiosity. At the end, the stock market holds billions and billions dollars for investors around the world.
And, as it happens with questions, there’s a lot of people willing to answer this one. Specially because there’s a huge incentive to offer some “insights”.
Some will tell you that the market is in an upswing. That the “bull” is here to stay. They will happily tell you why, and offer seemingly countless reasons, all with nice charts, and solid arguments backed by research departments of the “best” investment firms in the world.
Some others will say that the market is just about to crash. That there are “sure” signs that it will happen “soon”. And they will also offer compelling reasons, all backed by the research departments of the “best” investment firms in the world.
What do I say? I have no idea where the market’s going in the short term. Zero. Zilch. Nada. Why? Not because I’m ignorant, everyone is, it’s just that I’m willing to accept it. Now, let me tell you that I’m not alone in this view. actually, I learned this dose of humility from some of the brightest minds in the world of finance: Gene Fama. Kenneth French. Harry Markowitz. Warren Buffett.
Think of stock market prognostics as trying to bet on a coin flipping. You’ll have compelling reasons to choose either side. Heads or Tails. But, even sometimes a coin can land standing up. When will you know if your “bet” was right? When the coin lands.
That’s when the similarity ends. A coin will land in a few seconds. Investing is a long-term proposition, not one for the next few days, weeks, months or even years.
When you invest, you should be doing it with the next 20 years in mind.
Should prognosticators have a saying on how you invest? And if so, who would you listen? How do you determine when should you listen to the “Bears” or to the “Bulls”?
That’s a stressful proposition. And one that, if done wrongly, can cost you thousands or even millions of dollars. Or worse: Your peace of mind.
So, how to invest?
Instead of trying to find the “next” hot stock, or trying to guess the direction of the market, you should create a portfolio consistent with how much risk you need, are willing and are able to take.
Not more. And not less.
A portfolio built for you, according to your particular situation, and designed for the long term. Will it go up? Yes. Will it go down? Absolutely. But, from the get go you’ll have an idea of those kind of movements, so they don’t take you by surprise.
Want to learn how to build such a portfolio? Want to be sure if you already have it?
Let’s get in touch. I’ll be glad to help. Give me a call (915–747–3354) or send me a message through here.
Join me for Part 2 of this Series, where I’ll talk about Optimism and Investing.
My Name is Miguel Gomez, CFP®. I’m a Fee-Only Certified Financial Planner. I help successful people be more successful with their money.