There Is Never An Ideal Time To Invest


If you follow the financial markets, the below narratives may sound familiar…
 
2013 Analyst: “The end of quantitative easing and the Federal Reserve’s unprecedented monetary policies may forestall further gains in equities.” Outcome: Total return of S&P 500: +32.31%
 
2014 Analyst: “A sharp drop in commodity prices may be signalling a stalling of the global economy and justify reducing exposure equity exposure. Furthermore, the strongest performing asset class is the 30-year US government bond, which is predicting a coming apocalypse.” Outcome: S&P 500: +13.46%
 
2015 Analyst: “We are worried that market breadth is deteriorating rapidly. The tech stocks are the only bright spots in an otherwise bleak investing landscape. In fact, the average publicly traded company is now firmly in bear market territory.” Outcome: S&P 500: +1.23%
 
2016 Analyst: “We are troubled that the defensive sectors such as utilities and consumer staples stocks are the market leaders and momentum is waning in growth sectors. This interest in defensive assets may lead to something bad for the market.” Outcome: S&P 500 has recovered all the losses suffered in the first two month of the year. Should be interesting to see how the rest of 2016 shapes up.
 
I could go further back in time to sensationalise the concerns of market participants in the cross hairs of any given moment, but I think the point has been made. The stock market never looks perfect. There is always something to worry about, that’s what makes a market. If you are waiting on a perfect point of certainty in order to invest, it’s probably the time you will want to be the most cautious. There are always going to be issues such as wars, elections, corruption, debt cycles, commodity insecurity and a whole lot of people who are bigger, faster and smarter than you are in the market. In addition, there are shifting cross currents that offer little in the way of predictable patterns.
 
For example, right now the stock market is entirely obsessed with the day-to-day fluctuation in oil prices. Stocks want a rebound in oil to boost the sickly energy sector, prop up the credit markets and generally re-initiate a sense of inflation or consumption in the global economy.
 
Years ago, oil prices, at $100 per barrel, were a thorn in the side of stocks. If you saw a 4% jump in overnight crude oil futures, you could pretty much count on a big drop in the stock market. Funny how perceptions change over time and “rules of thumb” seem to disintegrate under differing global circumstances.
 
This all goes to prove a point. There is no perfect time when it comes to investing. There is only process and discipline to guide you through the difficult periods. Much of that discipline may involve tuning out the noise of the media that is constantly focusing on short-term themes or sensationalist headlines. They aren’t intentionally trying to hurt or persuade investors down any particular path. They are just motivated by different forces than we are.
 
There are going to be periods of turbulence that test the resolve of even the most ardent buy and holder or experienced trader. However, it’s imperative that you lean even further on your specific philosophy during those tumultuous days to achieve a successful outcome.
 
I know that many investors have been chasing their tails with individual stocks or sectors and trying to foresee the next big trend. However, in my opinion, this type of environment is more conducive to avoiding those hit-ormiss propositions by committing to broad based ETFs.
 
Put it this way, your ego wants you to own Facebook and Google so you can brag about it to your friends and coworkers. Of course, that probably means you own some dogs like Twitter and Yahoo as well (we’ll just keep those quiet).
 
On the flip side, your spouse wants you to own a nice portion of diversified bonds alongside some index funds. It’s not sexy, but it is a big stress reducer overall and will likely keep you from making rash decisions at inopportune times.
Bill Longstreet, is a partner with Shanghai based Caterer Goodman Partners, a fee based financial advisory firm. For more tips on how to handle your savings, check out their blog, www.chinaexpatmoney.com.