On stock picking and market timing, what should we do now?
Monthly AIRE Perspectives – September 2022
Dear Friends and Valued Clients,
Please see below for The MAP – Monthly AIRE Perspectives for this month.
On Stock Picking and Market Timing
As you know, we are believers in the Efficient Markets Hypothesis (“EMH”), which states that all news, information and the consensus expectations about the present condition and future direction of the economy and markets are instantly priced into stocks and bonds. Essentially, EMH states that the market already knows everything we know and immediately reflects new information into stock and bond prices, so that neither technical nor fundamental analysis can generate excess returns.
Despite the enormous amount of data that supports this theory, most investors and Wall Street professionals continue to try to pick stocks and make market predictions – two activities that we believe are not helpful, and potentially harmful, to long-term investment success. Rather than providing you with more data on this topic, we thought it would be more helpful to share an excellent video, sent to us by a dear client, that precisely states our message and belief. Please click here to watch a brief and interesting video on this topic. Let us know your thoughts!
What Should We Do Now?
As Financial Advisors, we are asked this question often, and particularly during times like these, when markets are turbulent. Our answer to this question, however, is not about making a prediction about the markets, but always based upon each client’s personal goals, risk tolerance, investment horizon and overall profile. We believe that investors should invest based upon a plan, rather than on predictions, and that stocks and real estate should only be held as long-term investments, rather than for short-term speculation.
If you have invested based upon a thoughtful plan that is already in place, as we have done with each of you, then the answer to the question of “What should we do now?” is probably either nothing or very little. Having said that, during market drops, we do check our asset allocation regularly and sometimes consider rebalancing. We also take advantage of opportunities to harvest tax losses, while retaining the same market exposure, or even consider adding, if appropriate. Throughout the upcoming few weeks, we will continue to reach out to you to discuss your portfolios and any potential action steps.
Once again, we would like to thank you for your trust and loyalty, and look forward to speaking with you in the upcoming month.
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