There’s been a bit of feisty action in the markets recently. Hmmmm, what to do?
Option 1 – PANIC
With recent headlines like “FTSE100 continues to fall”, “Stock market turmoil….FTSE loses £30bn”, “FTSE hits 3 year low…” and “FTSE100 crashes after China meltdown – is it another 2008…”
Look at all those scary words.
Ah gawwddd, the world’s heading towards all out anarchy, even gold won’t be safe. Everything as we know it will change, super gangs will take over the world, nuclear fallout will happen, bugs will grow to the size of rhinos, we’ll all be forced to live in mud huts in the forest as our investments are wiped to £nil and the economy shudders to a grotesque and violent halt.
Time to sell, to get out, to stop those losses from getting worse. And in the process crystallise the very thing I’m worried about in some nice poetic irony (take note Alanis M).
Option 2 – Bludgeon onwards
Using your powers of reason you can ignore those scary words and take a step back.
Take a deep breath and another, larger, step back.
There you go, you can see a lot more from way back here, stood atop the peak of hindsight mountain.
What’s happened since the start of 2016 is barely a blip in the near random walk that is the stock market. The recent financial news is a load of headlines to drive traffic, to cater to an audiences fear, nothing more.
Is another stock market crash coming, is another shit storm like 2008 going to happen again? Yes, nearly without a doubt. When is another crash coming? That’s a whole other kettle of toads. No one can say with any certainty, and anyone who thinks they can is lying or a real life wizard*.
My strategy doesn’t rely on selling at peak valuations, selling just before a crash and locking in some profit or anything else that requires a speculative guess at what the stock market is going to do in the next year, 5 years or 30 years.
So what is the Finance Zombie doing? Nothing. Well, that’s not strictly true, he’s just plodding on.
Putting my money on long run historical averages, reducing management costs, reducing trading costs and tax paid. I’m putting my money into diversified trackers, because in the long run they beat most active traders and funds. Sure, it is possible to beat the market. But the odds are piled against you. I’m not setting my self up to go bankrupt in a blaze of emotion fuelled trading glory. Instead I will bludgeon my way forward with trackers and ride out what ever storm comes my way, with a constant cynical view on anything that emerges in the news.
Remember kids: Spend Less, Save More & Escape the Horde.
*Wizards, sadly, don’t exist.
[And all that without dividends reinvested. Using a special pair of changing perspective lenses from the top of hindsight mountain we see a slightly different story.
A little out of date, but it makes a good point ]