If Investing is Exciting, You’re Doing Something Wrong
Although they're not perfect, the investment markets are generally efficient . . . but unpredictable. It is virtually impossible to predict the movement of specific investments or investment categories with any degree of reliable long-term success. Furthermore, there is no such thing as "normal" or "typical" market returns.
The “Investment Secret”
The secret to a successful long-term investment plan is remarkably simple. Keep costs low, manage volatility, and avoid the emotions of fear and greed during the inevitable ups and downs of the markets.
A Thoughtful Academic Approach
The science of prudent investing indicates that wise investors:
- Spread their holdings across diversified market components – “asset classes”.
- Rely upon the mathematical relationships between the different investment asset classes to blend together a portfolio where the "ups and downs" work to offset each other so as to avoid peaks that get too high and valleys that get too low.
- Balance their need for wealth accumulation with personal tolerance for market risk.
- Stick with a well-formed and disciplined plan to minimize costs and manage volatility.
Collectively, this is “passive” investing and is referred to as Strategic Asset Allocation. It encourages you to be patiently positioned to capture appropriate market returns whenever they may unpredictably occur. Stated another way, with this approach you take what the market gives you rather than trying to fight it and needlessly spend time, energy, and extra fees to try and chase returns.
Just like in Aesop's fable, it's the slow and steady tortoise who wins the race, not the rabbit.