Your Anchor in a Turbulent Sea - Old Peak Finance

Your Anchor in a Turbulent Sea

July 28, 2015

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Your Anchor in a Turbulent Sea

July 28, 2015

We’ve been in a bull market for stocks for six years. Sooner or later we’ll have a correction. I don’t know when. But I do know that the longer the bull lasts, the harder it is for investors to remember what a bear market is like … and the more risk that investors will panic and sell low.

We all know selling low destroys returns. But in the heat of the moment, we are often tempted to sell, thinking we’re preventing further losses and that we will know when to get back in.

Like everyone else, we’re human. So we have a few core beliefs that help us overcome the all-too-human urge to panic. These might work for you too.

  1. Long-term, stocks will go up. In the last 100 years there isn’t a 15-year period when the market didn’t go up. Maybe there will be someday, but if you take a long-term view, the odds are hugely in your favor.
  2. The probability is low that anyone can time the market. The market is too efficient — there are billions of dollars trying to do the same thing. Remember, timing the market means you have to be right twice — when you sell and when you buy back.
  3. Short-term returns tell us almost nothing. We buy stocks to hold them at least 10 years. Why focus on 1-year or 3-year returns, when every study suggests they tell us little about how those investments will do long-term?
  4. As long as we’re well diversified in intelligent investments, we’ll be fine. For us, “intelligent” means low-fee funds that use academic research to maximize likely returns.

If you embrace an investing philosophy like the one above, you can ignore the media, your neighbors and Wall Street banks, all of whom will try to convince you, in the next downturn, that the world has changed and you have to do something. Stick to your beliefs. You’ll be fine.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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