I see articles about the financial markets all the time that look interesting, but when you actually read them or see them featured in an interview or as a video online, they only create noise. Check out this article as an example.
As you see, these are all interesting thoughts. Some are so wide reaching that they are likely to come true, like a major market downturn in the next decade. That’s not surprising behavior…it’s reoccurring behavior. I definitely think digital currency is certainly possible in the next 10 years and that bonds will be under a lot of pressure in the near term, just like bonds overseas are now, especially in countries where they are highly leveraged with debt.
The great take away of all of this, and the reason I’m sharing it with you today, is that people are paid as economist and as writers to create forecasts, just like meteorologists are. The farther out you look, the less likely they are to be accurate though. What most people miss is not the accuracy of the forecast but the necessity to have one for these people to be relevant. The weather and the financial markets will do whatever they are going to do. And when it rains, you take an umbrella. When it’s hot, you turn on the air. You get the point… Talking about it doesn't change anything and most people take very little action on the information they read in the media. It’s more information than insight.
Whether active management surpasses a more passive approach remains to be seen, but the markets and the way markets are traded with machine learning algorithms crunching numbers 24/7, anything is possible. I still hold to the belief that a solid recipe of allocated investments maximizes return potential and minimizes risk. It’s not that easy to win Nobel prizes and several of the folks who have proven this concept have one.
Now, that said, we will also be looking for greater trends that could outperform the markets over time and add a little extra emphasis on the players who seem to have extraordinary potential in those categories. That’s the art part that complements the science part. If we’re right, you get a nice boost to your returns. So, a combination of passive with a touch of intentional, but limited, activity to read the macro signs seems to be the most intelligent approach. Time will tell.
Some things never change, especially with the financial media. And you can’t do the same things and expect a different result, right?
The good news is you have us looking out for you so you can do things you enjoy instead of worrying about some new thing that’s going to make or break our financial lives in this decade or any decade. Spend your time on things that make a positive difference in your life and enjoy the return on that investment vs. reading a bunch of articles that only make you more “informed” about someone else’s opinion about the future. After all, like Derek Sivers said, “If more information was the answer, we’d all be billionaires with perfect abs.”