The Certainty Principle

By Maureen Crimmins on September 15, 2014 in Behavioral Factors in Investing

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.

Jim states:

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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The foregoing content reflects the opinions of Crimmins Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.