Every month I sit down to write this newsletter with the hopes that you’ll find it interesting and timely and that it will make some difference in your life. I try to resist making any predictions about where the market, economy, interest rates or inflation are headed. Not only is there too much of that out there already but some of the sources seem more interested in getting you to sign up for their email, buy their book, listen to their podcast, or take their course than in providing real insight. I have been cultivating sources for years that I find interesting and that are trying to turn out relevant and insightful content. The good ones are few and far between.
What I don’t like are the sources that put out scary content alleging the world as we know it is ending and they have the investment, product, service or knowledge we need. I am not going to post any of the obvious ones but for me if it says, ‘sponsored content,’ it is probably a pass. Be choosey about the content you read, especially about the markets, although that advice probably applies to almost any topic.
As investors, we have greater sensitivity to losses than to gains. Fear may be our greatest enemy. The sensitivity to losses is increased when we monitor our investments frequently. A study in The Quarterly Journal of Economics showed that investors who checked their investments more frequently got worse results than those who check less frequently. Think about this for a second. We check our balances on our brokerage accounts, IRAs and 401ks all the time. We may have a strong sensation in the stomach when we open a statement that is down 5 or 10% and possibly decide to sell some of our investments. But if our home value goes down by 10% do we call up our realtor? Probably not. I suspect that all the information about stocks, the market, inflation may do us a disservice. And although you can look up your home value on Zillow every day, most of us don’t, because we are in it for the long term. I’ve used this analogy many times with clients who were stressed about their investment returns, reframing the loss in the context of their home value. Sometimes it helps provide some perspective, sometimes it doesn’t.
Trying to time the next market cycle is tricky at best. The best advice I can give is take a long-term view, know what an appropriate level of risk for you is, and avoid investments and investment gurus that promise instant success.
Have a great month, and know we are here for you.