There’s an old saying about the watched pot never boiling which simply means that if you wait anxiously for something to happen, it seems like it takes forever.
When one considers the markets over the past few years, it has behaved much like the proverbial pot and anyone desperately watching their funds, waiting for them to go up would most likely have grown despondent by now, thinking that markets will never go up again.
And then, all of a sudden, and almost while no one was watching, the ALSI is up over 6% for the month of July*. If you’ve been sitting in cash on the side lines waiting for the “pot to boil” before you climb in, you’ve missed this.
Once again this reinforces the wisdom that you cant time the markets and that ultimately it’s time in the markets that counts.
*yes, it is only back where it was about 2 years ago…but that’s not the point
So it looks like the “fuss” is all over and the equity market is set to run even further…I guess it is at times like these that you need to make sure you are “in for the ride” and not sitting on the sidelines watching it all go by. But it is also important that investors do a little “stock take” (pun intended) and understand/remember the following…afterall, has anyone seen the fat lady sing yet?
- Investing takes time – equity markets can be extremely volatile – remember the past year? They can and do move rapidly in the short term (up and down) and so, if you don’t have time, you cant afford to invest into equities solely (diversify).
- You cant time the markets – if you moved to cash a while back (after the market fell) and are still sitting there – sorry for you! You have missed the best part of the rally. You are either in or out – you cant be both and you cant time it right either!
- Learn to ignore the noise around you – have a plan (know why you are doing what you are doing) and stick to it. Don’t be swayed by the noise.
- Cash is not necessarily a “safe” or “low risk” option – it hardly ever beats inflation over time. And as an investor, inflation is your biggest enemy.
- There are probably still some significant risks in the financial system – share prices have run hard in anticipation of earnings…there are plenty of people trying hard to talk the market up but if there are earnings disappointments then expect to see some more down days…
- Inflation risk is still on the upside – big time – just imagine what the increase in electricity price increases is going to do to inflation (we are not alone in this – the UK is facing similar problems). Tradtionally high inflation is not good for shares…but it could still be a while before we see any siginificant increases in inflation.
Bottom line is this – have a plan and stick to it! If necessary find a good financial planner/coach who will guide you through this and coach you to stay the course.
The Financial Coach™