The Truth About Market Lies
If you read the business section of any major newspaper or website in the last month, I’m sure you saw headlines suggesting what would happen in the markets in 2019.
There are as many perspectives, as there are articles. Why is that? Because no one knows.
So why do we expect someone can predict the future? Why are we always looking for that perfect fund manager? That’s a very good question. Experience, history, business principles, leading indicators and economic trends can help to provide a sense of what the markets may encounter but no one has a crystal ball to predict the future.
Here are three market lies we know cannot be true based on our intellect and history, but we still act as though they are:
- Fund managers (at least the good ones) can predict the market
- It is possible to outproduce the market all of the time
- Given lies 1 & 2 (above), I can avoid poor markets
The next time one of these lies comes to mind, smile because you’ve recognized it as a lie, and stop it from trying to breed discontent. Discontentment is poison to our emotional health and robs us of a major source of true wealth – contentment.
The question to ask is not “Can we beat the market?”, but rather “Can we meet our benchmark (our financial goals and preferred future)?”
Unfortunately, the business model of the investment industry is to stroke discontentment with the products people have now. Firms and advisors are seeking new money and money already being managed by others. Stoking discontentment may gather new assets, but it does not help the client. The client moves to a new advisor, but the discontentment was just pushed under the surface – for now.
The question to ask is not “Can we beat the market?”, but rather “Can we meet our benchmark (our financial goals and preferred future)?” If we focus on our own goals, not how we are doing relative to someone else, we have a better chance of being content.
How to be content, even in the midst of a market storm:
- Recognize contentment is not dependent on a certain outcome
- Acknowledge life storms and market storms will happen. Rather than trying to prevent storms from happening, prepare for the storms
- Establish your goals and have a financial plan to achieve them
- Track your progress against your benchmark (your goals/plan) and ignore the noise of discontentment from the investment industry
- Utilize principle-based investing
Principle-based investing is about having a solid foundation, not weather prediction. We can’t predict the storm, but we can have a solid decision-making process and know investments are made based on how wealth is created: Productivity, leadership, debt management, preservation of capital, experience, willingness to admit mistakes and make adjustments, etc. If we make wise, informed decisions, we can be confident we are prepared and will weather the storm.
I’m not suggesting that long-term under-performance is acceptable; I’m saying our focus should be on achieving our preferred future. If we are on track to achieve our goals, we’ll know we are making an appropriate return for the risk we are taking. This knowledge will breed contentment.
Being content is being at ease with your situation. I believe being content is a major element of being wealthy. Recognize we cannot avoid life and market storms, but we can take steps to prepare for storms, so we minimize the frequency and length of periods of discontentment. Track your progress towards your preferred future, which is the only thing that matters, and enjoy the journey of true wealth.