One cannot ignore immutable
facts, or act as if indicators are otherwise.
The big risk for investors right now is hoping that the current scenario is an aberration from their
experience and expectations, and not to try to force money into investments
which they believe might perform. Leading that data is the fact that markets
are in a secular (longer-term) bear phase and not likely to change direction
immediately.
While the bear might have
further to run, we, the public, wait for retirement age, good roads, clean air,
abundant foodstuffs, quality medical care, safe streets, peace on earth,
etc. These expectations lead many to
stay too long or to flip in-and-out too quickly chasing elusive capital gains.
An argument against such haste is that objectives take time, methodology, prudence, discipline, and skill. In a climate of “fast” money, 24 hour news, and technological interconnectedness, I’m afraid we lose our audience simply by suggesting patience.
Door number two.
Recent news has focused upon
high profile events like oil spills and terrorism. These high value assets make people nervous
and threaten the stability of government, currency, markets, and home and
hearth. It becomes more difficult for
investors to know whether they are “winning or losing” at any given point in
time. Perceptions become reality and
measuring sticks shorten considerably.
Greater volatility changes
what we think we know and our comfort with those perceived realities. More
so than ever what has emerged is an investment palate that has too many colors,
too many nuances. These multitude of
choices creates fear, cynicism, and confusion.
The net result is fewer
players in the game and more volatility assigned to the “professional traders” who
fill the void left by the exodus of “average,” investors.
The potential that all
investing might become “automated” or “black-box” is something to be
considered.
Door number three.
Against this backdrop, I’m
growing increasingly impatient with members of the financial community who
“synthesize” investment ideas/products to sell to you. Fast talking hucksters on television shows
are inundating the public with “reverse-this” or “preferred-that” designed to “perform
well in all markets,” with track records of the last ten-minutes or so. A wide range of options is available to you
to dig-out from your 401-k disaster and to right the ship before you (a) retire
(b) go on vacation (c) change jobs
(d) find a job.
What’s next?
Investors must be judicious about multiplying the risk
in their lives to the extent that consequences become obviously negative or
narrowly opportunistic.
If you think investing is a
“race,” you’re already in the wrong ballgame.
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