It’s that time of the year when the financial press is full of predictions by very, very clever people of what the markets will do over the next 12 months. How do I know this? Well, because it happens every year as sure as the sun rising every morning and me hitting my brand-new Pro-V into the bush or water.
As with every year these forecasts are absolutely useless, and the forecasters are never held to account for their mistakes. So, why does this anomaly continue? Well, if enough “experts” are asked, some will be right every now and then, and when this happens, they live off the hype for years to come.
Why should we care where the markets are in 12 months? The truth is we shouldn’t. Perhaps in the next 10 years yes, or longer than that. Investing is a long-term game, we know this, yet we look for short term noise to feed either our hopes (greed) or our fears. Emotion is the single biggest destroyer of long-term wealth, yet we allow ourselves to be fed this nonsense time and time again.
What should our investment time horizon be? We are living longer than before and making it to 100 years old is not that unique anymore, but let’s say that this is the benchmark. As a 52-year-old, my time horizon is 48 years so if I believe the market will be higher in 48 years than it is now, then the only thing stressing about the next 12 month’s returns will do is damage my health and make sure I don’t get to that age.
Who would have believed in January 2020 that 12 months later we would be worried about when we could take a trip to the bottle store, go to school, go to work, travel overseas to visit our family and friends, let alone be thinking about getting a vaccine to a new virus? I do not remember a time where there has been less certainty about so many things but one thing I am certain of is, given time, the market will be higher than it is today.
Let’s worry about important things and things we can do something about, such as looking after ourselves and each other emotionally, being kind and supportive however we can to those in our lives.
Forget the markets, ignore the noise, and please never buy me new Pro-V’s.