If there is one thing we know about the ability of any of us to predict the future, it’s extremely difficult – nearly impossible.
What we know with great certainty is that we are going to face uncertainty. We also know that it’s our ability to handle this uncertainty, and to not let it shift our goals, strategies, and behavior, that plays a major role in how successful we are as investors and savers.
Take the June 23rd Brexit vote – when the British voted to exit the European Union. Most forecaster pundits, as well as investment markets, predicted that the vote would go towards Britain staying in the EU. Boy were they wrong - and apparently shocked. Stocks tumbled Friday and continued to fall today in reaction to the surprising vote.
To investors, Brexit is the just the latest in a continual, unpredictable string of market events that results in higher uncertainty and increased volatility. A former Fed Chairman used to call these periods "times of the unknown unknowns.” While we at TruNorth Capital clearly stay on top of short run market events, assessing liquidity and trading to make sure that new information doesn’t affect the core ability for markets to function, we are seeing markets continuing to operate properly – albeit trading lower.
The Brexit vote, and other similar negative events that shocked markets, be it the Asian crash of 1997, or 9.11, or the Lehman Brothers bankruptcy of 2008, or the 2010 flash crash, are part of what long-term investors recognize as inherently the most challenging parts of staying the course in investing.
Attempting to time the markets, or to react emotionally in the short run so as to change a long term investment strategy, often results in missing the market recovery when it eventually comes. As the old market adage goes ... in order to time stocks, you have to be right twice – knowing when to sell, but also when to buy back in. We know with greater statistical certainty that investors who remain in highly diversified global portfolios of stocks, bonds, real estate, commodities, private investments and cash – are more likely to be rewarded with higher rates of growth, than traders or speculators over time.
With the latest market shock coming via Brexit, we know that the short run is likely to continue to be a period of higher uncertainty as the process of the UK withdrawal, and modifying various trade agreements, treaties and other legal processes, is going to start in earnest now. We will continue to monitor all the events around Brexit to make sure that the market mechanisms continue to function properly. We remain committed in times like these to be steadfastly focused on long-term, low-cost strategies driven by planning to establish the right goals and objectives for every client.
We stand ready to discuss the recent market events, and help you understand how it impacts your financial goals and objectives, at any time. Please give us a call if we can be of any assistance.