The start of the new year is prime time for past year’s reflections, new year’s resolutions, and—in the world of investing—market predictions for the upcoming year.
Here at Woodward Financial Advisors, our thoughts on market predictions are easy to summarize: we don’t have an investment outlook, we have an investment philosophy.
An investor would get the opposite impression by scrolling through the news as headlines boldly predict the future and urge investors to take action.
It is understandable to find comfort in seemingly concrete predictions and to seek out some level of certainty in a very uncertain world. The problem is that we know consistently timing the market is very difficult (if not impossible) and that trying to do so often leads to poor investment results over the long term.
As disciplined investors, we must be careful not to fall into the traps set forth by the media. We need to remember that headlines are designed to grab our attention so that we will read the article. After all, a headline that says, “it is unclear how markets will perform in 2017” or “the market will go up, or it will go down,” would not garner many “clicks” from readers.
What is the individual investor to do to combat this season of predictions? We have three recommendations for our clients.
The first is to remember your portfolio is built upon a dynamic financial plan that accounts for a thousand possible market outcomes. This plan is intended to ensure your spending goals can be met in a multitude of investing environments.
Our second recommendation is to focus on what you can control: minimizing costs and taxes, maintaining an appropriate asset allocation, staying diversified, and monitoring your saving or spending rates. All of these elements are key facets in our investment philosophy and planning process.
Lastly, if you find yourself glued to a compelling headline this time of year (as many investors do), take a step back and remember what the headline leaves out: investors have been rewarded by long-term discipline. Doing nothing, while difficult, has often led to far better investment results than doing “something” in the face of uncertainty.