Theoretically, the best investor is the one with a crystal ball – one who can see the future and capitalize on it. In the absence of such a magical device, smart investors focus on what they can control to gain an advantage over other investors.
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Timely views and timeless advice on investing and planning from Thompson Wealth Management, Ltd.
Debunking the Action Bias
At times like these, investors often wonder whether they should react to the market correction. The newest member of our gang here at TWM, Jordan Gentile, played goalie on his college soccer team. In our e-Letter this month, he offers this interesting analogy about how goalies tend to react when they face the ultimate pressure situation, a penalty kick. Most goalies “feel” like they need to do something, jump to the right or the left, to try to stop the shot. But statistics show they would be better off if they just stayed put in the middle.
The sudden drop in the market has everyone looking for a culprit. The explanation may be much more elementary than you think, my dear Watson. Remember, the stock market predicts about twenty recessions for every one that actually occurs. In this case, stocks have been falling despite generally positive economic news. This suggests that the correction is probably technical, and not fundamental in nature.
Not even the sharpest living minds on investing have a good clue what’s coming next. Oracle of Omaha Warren Buffett admitted in May that he had been “wrong” about interest rates. Global investors continue to struggle in the quest for signs of what the future will look like – for interest rates, for China, for energy, for Greece. It’s an enigma everywhere, making the financial markets one of today’s greatest mysteries. Bruce Thompson spies the real culprit in the recent market decline.
The famous marshmallow test conducted in the 1960's showed that we have a hard time resisting instant gratification, even if we know that delaying gratification would lead to an even bigger reward. This, in short, is what makes investing and managing businesses so hard. Success requires many qualities, but conviction, discipline and thinking long-term must rank near the top....
Market Focus: Value and Dividend Stocks out of Fashion
As a style of investing, dividends have under-performed the market recently. Portfolios with an equity income emphasis have lagged the market in the last couple of years. While frustrating in the short run, the longer term picture tells a different story: focus on fundamentals, not trends. In fact, we can exploit trends – not by chasing them, but by faithfully diversifying and rebalancing.
By Marley Jay and Steve Rothwell Associated Press July 21, 2015
NEW YORK — Investors are running out of reasons to own gold.
The price of the metal, which is often seen as a hedge against inflation and a weak dollar, slumped to its lowest in five years on Monday.