People focus on returns, average returns, good or bad returns. Rather, progress isn’t made over short terms, but over the longer term. So how often have the markets been positive?
The below article explains how to better view markets and how you should participate in them for healthier and wealthier outcomes.
It illustrates how infrequent markets are anywhere near the historical average, even with a 2 percent margin around that average!
Instead, what should be be looking at? Look at the frequency markets are positive over various time frames. The longer you stay invested, the better your results! What’s the best long term perspective? The rest of your life in my opinion.
Moral of the story:
“Beware the Gambler’s Fallacy” were one thinks they can predict the odds of a reversal (or streak – the “hot hand fallacy”) better than the odds actually suggest. We can’t predict at all – so simply quit trying!
We may expect a change … but we know neither when or to what extent. Best to understand the greater odds than trying to predict the short term.
Note: Your email may not show the embedded part of this blog … please go to the blog to be able to read the complete post.
PS. In the interest of disclosure: I do use Dimensional sub-managed SA Funds with most clients (not a fund requirement, but a business standardization decision I’ve made because of the evidence based approach
Analogies that explain the difference between investing and planning (Yes, they are different)! :
- Investing is the fuel for your plan – it is not the plan itself.
- Investing are the cables that support your bridge which is the plan that gets you where you are to where you want to get to.
This blog is not a solicitation; simply an explanation of the basic philosophy and approach.
Photo source: From the enclosed Dimensional article.
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