Timing is everything; isn't it?
At the end of most years, I have people tell me that they are either happy or disappointed with the returns of their risk investments. Mostly this comes down to their reactions on overall stock market performance. If the market goes up, they want it all, and if it goes down, they wonder why they ever invested in that terrible gamble machine and the second guessing starts all over again. In nearly 30 years, I have never met anyone in my office that could market-time with any lasting success at all.
The following are some of the thoughts on market timing from Tony Robbins new book; "Money - Master the Game."
The best comics know exactly when to deliver a punch-line. And the smartest investors know just when to enter the market – except when they don't! Even the best of the best fail to hit every beat, every single time. For a comedian, a mistake in timing results in an embarrassing, deathly silence in the house – and maybe a few thrown objects. But if you're an investor, a mistake in timing can destroy your nest egg. So we need a solution that doesn't require us to be a psychic.
A diversified portfolio across different asset classes and across different markets can protect you in a volatile economy. But haven't you ever had the experience of being at the right place or doing exactly the right thing; but at the wrong time? In other words the timing is off? What if you put your money in the stock market at its peak, and it starts dropping? Or if you buy into a bond fund, and the interest rates begin to spike? Markets are always going to fluctuate, and we've learned that nobody can consistently and successfully predict when it's going to happen.
Most investors get caught up in a kind of mob mentality that has them chasing winners and running away from losers. Mutual fund managers do the same thing. It's human nature to want to follow the pack and not miss out on anything. "Emotions get a hold of us and we, as investors, tend to do very stupid things," according to Princeton economist Burton Malkiel. "We tend to put money into the market and take it out at exactly the wrong time." Greed = Buy and Fear = Sell; then repeat until broke.
In any well-planned financial portfolio, you should be positioned to face any economic adventure that comes along. Also, keep in mind that December is an excellent time for a financial review.
We have met the enemy, and he is us – Pogo.