At the risk of committing career suicide I would like to admit the following. I have no idea the affect Trump will have on our share market over the next few months…..I can hear the response “What! You don’t know. How can you not know?
I doubt very many financial advisors will admit that they don’t know. Our careers are built around sounding super credible with a solid grasp of factors influencing world markets, however the fact is any prediction we make will likely be wrong.
Unfortunately, clients expect you to know; they want you to know. But the truth is prices are far more complicated than you think, with only 50% of the short-term price movements determined by fundamentals. Investors will do well to remind themselves “we only know half of what we think we know”.
The recent volatility of markets around the world on the back of the US elections is a perfect example of living in fear. Fear is a powerful emotion and it is difficult to ignore. The fact is bad news captures our attention more than good news and the reason is simple; fear is a basic survival mechanism – an emotional response to a perceived threat or danger. Fear drives markets at the expense of objectivity and logic.
You may not have any control over world stock markets, but you do have control over your emotions and how you react to bad news. And this is the secret to long-term wealth creation vs. wealth destruction. Even the Global Financial Crisis of 2008 seems like just another blip on the long-term radar screen of world stock markets. Stick to your long-term plans and try your best to ignore the noise.
Old Chinese proverb says “muddy waters make it easy to catch a fish”.
Mcomm, CFP®, HdipTax
T. 021-851 3746