Forecasting The Stock Market: A Fool’s Game

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It’s that time of year again. We are entering the season of vacations, family reunions, boating, fishing, golf and everything else that makes summer time one of the best times of the year. We are also entering the summer doldrums in the stock market where volatility seems to always rear its head.

Almost every summer the end of the world occurs. Last summer it was Brexit. It was going to destroy Europe. The summer of 2015 it happened in August when China’s growth was over, and the country’s progress into a developed market was over. The forecasts that come out generally discuss the stock markets bull run ending, the economy going into a recession and gold becoming the best investment possible.

At this point in time, when this volatility occurs, you will also be email bombed or receive some other type of advertising from newsletter writers all predicting “the end”. They will tell you the only way to escape “the end” is to subscribe to their product. Or you’ll see someone selling some sort of special tool that can “forecast the market.” (Fear is an incredible marketing tool!)

Legendary investor John Bogle said the following regarding stock market forecasting,

Sure, it would be great to get out of the stock market at the high and back in at the low, but in 65 years of business, I not only have never met anybody that knew how to do it, I’ve never met anybody who had met anybody that knew how to do it.

Or there’s Warren Buffett who said, “The only value of stock forecasters is to make fortune-tellers look good.”

IF the volatility occurs this summer, IF North Korea does something crazy or IF something happens in the circus tent of Washington D.C., remember this factoid –

From 1980 to 2015 the S&P 500 (stock market) had an average intra-year decline of 14.2%. Over a 36-year time frame, these market declines were regular occurrences. The most fascinating part of this, is that the S&P 500 ended up achieving a positive return in 27 of those 36 years. 75% of the time!* (Imagine selling at the bottom out of fear only to see the market rally higher.)

The last thing I will mention to you regarding the subject is, don’t worry, you aren’t alone.

When people hire us to manage their investment accounts, part of what they are hiring us to do is to act as behavioral counselors. We spend time with people discussing their goals, objectives, risk tolerances, and in large part, to prevent them from making a big mistake that will kill the long-term plan.

When volatility occurs, as it has in the past, we will re-iterate the following –

Your goals are not based on a one week, one month, or one year market returns. Focus on the long term, take advantage and embrace the volatility of the short term, and you will end up where you want to be.

Here’s to wise investing,

Brett Pattison

What We’re Reading

Tony Robbins: Hidden Fees are killing your retirement plans. We have written about this subject before (click here). Obviously we agree with Tony. Find a fiduciary Registered Investment Advisor (surprisingly only 1.6% of the Nations advisors are independent fiduciary Advisors) who will provide you the services and transparency you deserve.

Too Flustered to Trade: A Portrait of the Angry Investor. This is written by Jason Zweig and is a flashback to a 2011 article. It’s content goes hand in hand with our blog post today. He explains a “big mistake” that many people made or may make in the future. This is one of those “big mistakes” that we mention in our blog post.

When buying a stock, ask yourself: What am I betting against? This is a great article that points to a very important part of the stock investing process that few ask. We have implemented this as part of Iron Gate’s process, and if you’re investing in any business (stock, real estate, etc.), you’d be smart to ask yourself the same thing!

 

Disclosures: All investments have inherent risks. There can be no assurance that the investment strategy proposed will obtain its goal. Past performance does not guarantee future results. Options contain risk that may result in the loss exceeding the original investment. Do not trade options until you talk with a financial professional and understand the risk.

Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax or legal advice. Although the information has been gathered from sources believed to be reliable, Iron Gate Global Advisors does not guarantee its accuracy or completeness. Please note that individual situations can vary, therefore, the information should be considered when coordinated with individual professional advice. Investors should be aware that there are risks inherent in all investments, such as fluctuations in investment principal and the potential loss of principal.

Neither the information in this document nor any option expressed herein constitutes an offer to sell or solicit any person to purchase any security. Investment decisions should not be made based on information in this document. Individuals should rely exclusively on the offering material when considering whether to invest.

*Source, Tony Robbins Unshakeable

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Categories: Strategy.