Don’t let outside noise interfere with your long-term plan.
The market effectively enables competition among many market participants who voluntarily agree to transact. This trading aggregates a vast amount of dispersed information and drives it into security prices. In 2015, 98.6 million trades a day took place in World Equity Trading and the dollar volume was $447.3 billion a day. (Source: World Federation of Exchanges)
{Read in 1:30 minutes} While informative and knowledgeable, the financial press is backward-looking rather than forward-looking, which means it has no predictive value for the future.
Journalists do a great job of describing what has already happened, but that’s known information, and as they say, hindsight is 20/20. Journalists can’t describe what will happen; it’s not their job to prognosticate the future. They make opinions about trends, but those opinions are not meaningful when it comes to managing portfolios.
{Read in 1:50 minutes} The federal government—”the Fed”—is interesting. It’s fun to talk about, much like a sporting event or celebrity gossip or the latest health scare. And it is just as much the subject of daily headlines as those news items.
Financial journalists love to report the Fed’s every financial movement, trying to make it relevant to investment. Some advisors play along, pretending they can predict markets based on the Fed, in hopes of attracting investors and motivating them to keep making transactions. Some say that the interest rates move and the Fed follows.
The United States Department of Labor (DOL) has set forth a new guideline, known as “401,” for investment houses. 401 will make it mandatory that their agents take a fiduciary role with all of their clients’ retirement accounts.
The proposal, which is set to take effect in 2017, will require all investment advisers of individual retirement accounts (IRAs) and 401k’s to take on the the role of a fiduciary and disclose all of the investment fees including compensation to their investors. It will provide transparency.