It sure seems as though you’re stuck in a rut. Just a few weeks ago Wall Street traders were donning embroidered hats with “Dow 20,000” on them in anticipation of reaching this stock market milestone. As investors approach proverbial milestones, their thinking and decision making process often begins to falter. How was your mindset when the Dow Jones cracked 14,000 in October of 2007 versus not too long afterward when it was at 6,600 in March of 2009?
The number of investors that are still sitting in cash from way back then is mind boggling! Do you take a long time making decisions? Are you worried about making the wrong choice with your investments and therefore don’t take any action? Do you analyze all the options but later on kick yourself seeing that so many opportunities have passed you by?
If any of these questions resonate with you, it’s likely that you suffer from paralysis by analysis! Here are a few steps to consider and break free of this condition:
Crystalize the objective – The first step in overcoming paralysis by analysis is to truly understand your goal and timeline. Not everything is accomplished in one day. Your end goal will come to you by taking action but you must avoid being overwhelmed with a multitude of choices or an instant desire for perfection.
Rip the Band-Aid off! – This is obviously much easier said than done. Advising someone who overanalyzes and is prone to being indecisive, will not likely yield in a comfortable transition. There are occasions, however, where “going all in” makes sense. Practice taking small action steps that lead you to becoming confident and decisive. Once you realize that making small mistakes doesn’t always derail the end goal, you will be that much closer to breaking free of larger decisions that demand your action.
No rearview mirror needed – Paralysis by analysis can creep into your portfolio if you continuously kick yourself for past mistakes. We can learn from history but hanging on to the past can have serious negative consequences. History doesn’t necessarily repeat itself and sometimes a fresh start is exactly what you need to break through. Be forward looking as opposed to focusing so much on what has or has not happened before.
Tip-toe in the water – The typical investing approach to “tip toeing into the water” is basically dollar cost averaging. As opposed to going all in at once you may be more comfortable with more of a phased or stair-step strategy. Another way to implement a plan like this is to invest your idle cash in thirds towards your established target allocation. Ideally you should select trigger points when the market is showing weakness. Keep in mind that once you begin this course of action you must commit to completing it.
Declutter! – Most people can’t park their car in their own garage due to all the junk that has piled up over the years. Your investment portfolio and the decisions (or lack thereof) can become very much like an unusable garage! Simply get rid of what you don’t need. If you have investments that aren’t in line with a solid plan…dump them now and don’t look back. If you’re interviewing financial advisors and there are clearly some poor choices, don’t even meet with them. Why spend time and not advance a decision due to energy being wasted on distractions?
Delegate it to a pro! – Let’s put it this way…. If you had a financial advisor who got nervous at key stock market milestones and stayed in cash far too long while the market took off to set new record highs….you would fire them, right? If that financial advisor is YOU…it might be time to fire yourself! You may be very intelligent, perform tremendous due diligence (almost to a fault), and of course have your best interest in mind; but if you don’t have a clear and decisive investment strategy, you’re simply not capable of optimally managing your investments.
How dare we put you on the spot like this?!? What an awful question! How will you (the stock market) react if Trump wins or if Hillary wins? By the way…as an aside….a great client of ours recently asked why everyone refers to Trump by his last name and Hillary by her first name. Why is that?
Depending on which side you’re on, this question may initially seem like simple semantics but it’s not. Are you “presidential” if you roll with a campaign based on your first name? Do you “feel the Bern” or did you “Trust in Ted”? Whether you’re a proponent of Hillary for President or Hillary for prison…it’s still Hillary. Where are we at America?
At My Portfolio Guide, the one thing we typically don’t shy away from is having a clear opinion. There are some great firms out there that simply can’t give you one! You’ll hear what you want to hear. They fear losing your “vote” or ruffling feathers. Yes…we understand that balance too, but as much as our job is about deciphering news versus noise…it does become important to take a stance. Continue reading →
The entertainment and shock value you provide us with the stock market might meet its match over the next few weeks. Are you ready for some surprises and wild finishes? That’s what March Madness brings each and every year! It’s also an opportunity to take a high level view of the current investment environment with what lies ahead.
Six years ago we became the first Registered Investment Advisor to use the NCAA basketball tournament as a way to show our readers a forward-looking view on the stock market. We break down and assign each of the four “regions” with an asset class and then pick teams (companies) that we think have the best chance at doing well relative to others.
This year we will dive right into our investing bracket looks and how we think the remainder of 2016 will play out.
To set the table let’s take a quick moment to recall last year and the undefeated Kentucky team. They came into the Final Four 38-0 and were a virtual lock to win it all but as you may remember the Wisconsin Badgers shocked everyone and provided the surprise millions of fans tune in for every year! This type of “upset” is exactly how we think 2016 will pan out in the Large Cap asset class.
Five years from now people will look back at 2015 as a year that the stock market extended its bull market run for one more year. Investors will exhibit a short-term memory lapse and forget that it actually was a very rough year with heightened volatility, the first correction, and a market that actually turned in negative numbers if you looked “under the hood”. The problem is…most people will not remember this and only look to see the S&P 500 finished positive +1.38%.
Without the “FANG” stock phenomena, however, 2015 would have been very negative. In other words, Continue reading →
If you’re smart…does it imply that you’re always right? In many instances that may often be the case, but when it comes to investing, some of the most brilliant people on the planet are reduced to buffoons by irrational and unpredictable markets. When you add in a 24/7 media cycle and the fact that human beings are emotionally driven creatures…your IQ (or stubbornness) can actually work against you.
As huge fans of behavioral finance we also want to once again remind you that your own brain (whether it be “smart” or pedestrian) is wired to connect certain dots even if the conclusion is wrong or completely random. One famous adage will serve as the theme for this entire article:
“Even a broken clock is right twice a day.”
Take a brief moment to read the following article that surfaced last week:Continue reading →
The markets continue to take investors on a bumpy ride with dramatic swings to the positive and negative. Volatility has been here for the last several weeks and it is beginning to have an effect on investors and the decisions they make in regards to their portfolios. Investors are notorious for putting their portfolio on cruise control when the markets are doing well and then becoming hyper-sensitive when negative returns start appearing on their monthly statements. With the first true market correction (-10% or more) in nearly four years, investors are considering a variety of options with their portfolios, many of them misleading and possibly disastrous. As fear and uncertainty build emotions begin to take control. There are many products and options that prey on investors in these environments…don’t allow yourself to fall for any of the five most common ones we discuss below…
Going to Cash – This is the classic move by investors when they simply can’t take it anymore; throwing their hands up in the air and admitting defeat by selling everything and going to cash. They justify it in their mind, feeling good about it; after all, jumping out and preserving what was left of their portfolio seems like the prudent thing to do. If this is you or you are considering this ‘strategy’ don’t start patting yourself on the back just yet! This could possibly be the worst move an investor could make unless they want to push back their retirement or drastically alter their financial goals. Consider this, every year for the last 35 years the markets have posted negative returns at some point during the year and 87% of the time the markets finished the year positive. Selling everything in your portfolio would be comparable to buying a new car and selling it as soon as you drive it off the lot because you realized that it went down 20% in value! Would you ever do that? We doubt it so don’t do this with your investments! Continue reading →
If you’ve never experienced a stock market correction until now (technically defined as -10% or more), you have either never invested or have only been investing since 2012. For the vast majority of others, you should know that markets “correct” on average at least once every 12-18 months. One reason why this feels worse than other corrections is because we just went 47 months without a correction of -10% or more! (third longest streak on record)
For a refresher, stock market corrections are short and sharp declines of -10% to -20%. They’re typically accompanied by sensationalized stories such as the European sovereign debt crisis, Greece’s exit from the Euro, or the “fiscal cliff”. For all those investors that ducked for cover and went to cash during the last correction you saw the Dow Jones move up over 6,000 points. Were you able to correctly “time” your reentry into the market? No…and you’re not alone. No matter what you read or hear there is not a single person or professional advisor that owns a crystal ball and can consistently time the market.
If you’re new to this monthly series…remember what we’re doing. This exercise, as we like to call it, is not an attempt to pick the best stock or “time the market”. We leave that futile task to those who own time machines and accurate crystal balls. For a refresher, see our first article on the MPG Core Tactical 60/40 Portfolio.
Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (September 1, 2015).
Click here to compare our portfolio against the benchmark.
From the last week in July to this writing the MPG Core Tactical 60/40 portfolio went down -4.49%. How did the rest of the markets do? Continue reading →
How crazy has this market been? As always the stock market has been very volatile, right?
Not even close…. The stock market is essentially in a coma right now and you need to ignore whatever news source or preconceived notions that tell you otherwise. The irony is that some of the “smart money” could not have got the volatility prediction more wrong.
In January of this year Scott Wren, senior global equity strategist at the Wells Fargo Investment Institute, predicted dramatic swings in many areas of the market. He summarized this sentiment by saying, “I don’t see this volatility going away anytime soon.” We’re not out to point fingers but it’s blanket statements and unaccountable predictions like this that paralyze people or simply clutter their investment strategies and overall mindsets.
We’re actually in an extremely low level of volatility. It’s been eight weeks since we’ve seen a move of at least 1% or more in the S&P 500 and that hasn’t happened in 21 years! We also just wrapped up the first half of 2015 and there wasn’t a gain or loss of 2% which marks the first time that has happened since 2005. (Click here to see 2015 volatility relative to recent years)
As an investor you actually should be doing what we would call a “volatility rain dance”. Bring it on! You want volatility. If your long-term belief is that the economy will improve and inflation seems to remain very much in check, you want a pullback in the market in order to put some money to work. Cash sitting in a bank earning “zero point zilch” needs to work harder and smarter but without a material pullback in the market it makes it somewhat uninviting to deploy cash.
Low volatility doesn’t necessarily equate to the “quiet before the storm”…although it’s certainly easy to think that way. The market is not a weather system but rather it needs a catalyst to move strongly up or down. Unless we slip into a recession you can expect the stock market to meander along for a while. If we do indeed continue to trade in a range bound fashion don’t feel the urge to make changes just for the sake of it. Lastly, turn off your television because every sensational interview with an analyst needs to grab eyeballs and predicting low volatility doesn’t fall into that category…