A friend and fellow Investor Coach from NJ shared a story of a recent trip.
While in Europe with his wife a earthquake and then hurricane hit the East Coast and they couldn’t get home. All flights from anywhere in Ireland to anywhere in the United States were canceled, So, he bought a newspaper, The Irish Times to be specific, and a cup of coffee, to settle down for a long wait.
While browsing through the paper, an article jumped out at him entitled “Investor ‘prediction addiction’ now most relevant.” He shared that he was pleasantly surprised at the positive portrayal of our Investment Philosophy that he found in the article.
“Prediction Addiction” is a term coined by Wall Street Journal columnist Jason Zweig. It refers to the unfortunate tendencies of modern human brains to project investment performance patterns, especially recent patterns, into the future.
Unfortunately, most financial advisors and investors project these patterns into the near future, and wrongly conclude that the market is “trending” up or down. So they get in and out of the market accordingly. Such patterns are sure to be irrelevant and nonsensical. Disappointment usually follows. This is Market Timing, sometimes called Tactical Asset Allocation, and it just doesn’t work. If you have a properly and well-designed portfolio in the first place, there is no reason to panic and make unwarranted changes because of market volatility.
The Irish Times article quotes William Hamilton, the 4th editor of the Wall Street Journal, who wrote in his 1922 classic, The Stock Market Barometer, that “the market represents everything everybody knows, hopes, believes, anticipates, with all that knowledge sifted down to…the bloodless verdict of the market place.” Almost 90 years later, this observation still applies. Sort of like what we’ve been saying for years, that you simply can’t time the market.
Below you will find a Fox Business News video that features my friend and fellow advisor, Mark Matson, the gold guru Peter Schiff discussing Augusts market volatility and timing of the market in September.
http://video.foxbusiness.com/?playlist_id=1071839331001#/v/1139912201001/will-september-be-even-worse-for-markets/?playlist_id=1071839331001