{1 minute to read} Enjoy the holiday season! The election is over. The year is almost over. Don’t think about your money. Let your money work for you. Markets are always priced to have a positive expected rate of return. The media and your neighbor or friend are always going to try to scare you or get you to do something. But you should follow the plan that you have in place.
{2 minutes to read} People often base their investments on their emotions and their predictions. What I want people to realize is that when you’re investing properly, you’re not really making any predictions. You’re using data and empirical research that incorporates information from market participants globally.
Predictions can seem very entertaining. They might even be fun, with a small stake of the money. But you only remember your correct predictions. Predictions can cause you to go off the rails and not achieve your financial goals. You should not base your portfolio on predictions. You want to succeed with your financial goals. And if you think you’re smart because you make an accurate prediction, remember you can also be wrong. As John Kenneth Galbraith said, “The only function of economic forecasting is to make astrology look respectable.”
{1:50 minutes to read} While the Presidential election is very important to the United States, its impact on one’s long term planning is zero.
The election is very contentious. People have their personal preference over the candidates. Many people despise Donald Trump, and many people despise Hillary Clinton.
{Read in 1:50 minutes} Price fluctuations are a normal part of investing.
The stock market can go up any given year, but the price fluctuations within each day, week or month can go up or down. Long-term investors shouldn’t equate those granular ups and downs with overall risk in a portfolio. Risk is a permanent loss of capital.
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)