We live in a culture that is filled with information at our fingertips…literally. And we expect to be able to ascertain exactly what we should do with this given information.
But are we sure?
The path should be obvious with the media informing us their opinions on the market and when the appropriate time is to get out of the market or when it is time to get back in. However, this is rarely the correct assessment. Some will indicate that the market has bottomed out, while others will indicate that it hasn’t. So, which is right?
This uncertainly will keep some investors out of the market in cash waiting until the direction is clear.
As Jim Parker of our partner DFA suggests in his article “The Certainty Principle”, there is an alternative approach to deal with the market implications of news and to try to anticipate what might happen next.
That means building a diversified portfolio around the known dimensions of expected returns according to your own needs and risk appetite, not according to the opinions of media and market pundits about what will happen next month or next week.
Establishing a portfolio, staying disciplined with your asset allocation, and re-balancing to this asset allocation is not media driven but market driven. So rather than betting against the market, you work with the market.
Staying focused on your long-term investment plan will allow you to ignore the media noise and continue on the path to a successful retirement.
Click here for Jim Parker’s article: The_Certainty_Principle
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