The market has risen or been relatively flat every year since 2009. When will this end? When will the next bear market begin? Unfortunately these questions are nearly impossible to answer. Even more unfortunate, billions of dollars are lost each year by individual investors trying to guess the answers.
You may be thinking to yourself “That’s not completely right! I’ve heard about several people who predicted the dot com and housing market crashes.” Yes, it is true that there were people who called these crashes before they happened. However, many of these predictors made their predictions years before the crashes occurred. What’s more, there is no shortage of pundits and economists who are constantly calling the next crash. Eventually they will be right, but if you listen to them you are likely to miss out on all of the good years as well. For example, in each of the last two presidential elections, media pundits broadcasted that economists were calling for bad markets if President Obama was elected in 2012 and if President Trump was elected in 2016. If you listened to the pundits, you might have missed out on the S&P 500 gaining over 30% in 2013 and over 5% so far this year. Remember, the media is not in the business of making accurate predictions. They are in the business of attracting eyeballs. Give too much credence to what they are saying, and your retirement portfolio may pay the price.
“Remember, the media is not in the business of making accurate predictions. They are in the business of attracting eyeballs.”
Why is it so hard to make accurate predictions on the timing of large market movements? This is largely due to the fact that markets are extremely complex. It’s tempting to get caught up in the narrative that markets will rise or fall because of x or y, however, there are hundreds, if not thousands of factors that play a role in determining their course. On top of that, markets will also be influenced by unpredictable future events. The economy could be humming along fine, and bam! All of the sudden a large natural disaster occurs in the wrong place, sending markets into a frenzy.
What to do in an unpredictable world
For many reasons, including those stated above, we believe it is best to pick a long-term investment plan based on your goals and financial risk tolerance. We know there will be good and bad markets ahead, but we don’t know when they will come. Therefore, we advise you to pick a sensible plan and stay the course.
This blog is provided by Windward Private Wealth Management Inc. (“Windward” or the “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. No portion of this blog is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in the individual blog posts will be derived from sources that Windward believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.
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