No matter how much we wish, no one can predict the market. No one will know when to go to cash and when to go all in. Like a broken clock, sometimes forecasts can be correct, but they lack persistence.
Our forecast is persistent and reliable because it is based on how we feel, and temptations we face as investors. Not only are these more predictable than market outcomes, they are also more important to investor well-being.
While we cannot control the volatility and outcomes of the stock market, we can control how we behave and respond to market outcomes. Financial markets are only one side of the investing equation, the other side is the choices you make. Best to focus on the part we have control over. And understanding what we may face can help us improve our decision-making process.
Our 2020 Forecast
In full disclosure, this is nearly identical to the forecast we had for 2019 (and years prior to that).
- The economy/market will do something that surprises us
- Investors who watch the market often will experience more stress than those that don’t
- While we can’t predict the future, all will seem obvious in hindsight
- You will be tempted to abandon your plan at some point based on expert forecasts and/or short-term market performance
- Investors that focus on those things they can control will have a better investment experience than those that focus on what they can’t control nor predict
- Investing with your gut, or feelings, will result in lower returns and higher stress than if you remain disciplined to your financial plan
- Not looking, aka “strategic ignorance”, will result in less stress and greater personal enjoyment than watching the market
Investing is simple, but not easy. It is difficult to stick with a strategy when it is out of favor. Patience and discipline are virtues because they aren’t easy, yet they are essential for your success. As your advisor, one of my most important roles is helping you decipher the noise from what really matters for your financial success.
We wish you a prosperous, fulfilling and happy 2020. Thank you for allowing us to be your trusted partner along the journey.
©2019 The Behavioral Finance Network. Used with permission.