Best to stay out of the markets: How often in the tumult of the past year have you been inclined or advised to this effect – too many complications, heightened risks, it’s all so different, best to stay away until the future outlook clears.
No doubt an oil price collapse of epic proportion and artificially low bank interest rates – in the U.S. kept at near-zero levels for years on end – have taken their toll. But to categorically stay out of the stock markets and avoid investing would be to ignore the late Sir John Templeton’s warning that the words “this time it’s different” are the most expensive, or dangerous, in the entire investment lexicon. Even Sir John would probably agree it has been a lot different since the near-collapse of the world financial system in the years 2007-09 and the dislocations of that oil-related “tsunami” that began hitting in late-2014. But, maybe not so different that the timeless market cycle and its ceaseless self-adjusting mechanisms wouldn’t once again bring inevitable economic and stock market recovery.
Sir John never had any doubt about this as he reminded how bear markets are born at the height of euphoria, like the tech-boom of 2000 – 01, and bull markets in the depths of despair, like the spring of 2009 – and possibly January – February 2016.
As well there was his steadfast adherence to “time in” rather than “timing” the markets being much the more important, but always – according to a well-planned and executed investment strategy. Add his favourite word “fortitude” and his famous Templeton Mountain Chart serves as a timeless reminder of what a disciplined, long-term approach to investing can bring.
While precise market timing can never be easy, waiting for a Godot mostly never turns up can only be self-defeating. The fact is it is never altogether different. Instead, why not take Sir John at his word; invest according to a strategically balanced plan. Wounded Canadian investors should keep doing so “fortified” in the knowledge that a fire-sale cheap Canada, its dollar and stock markets can seldom have offered such longer-term bargain investment attraction to accommodate individual capital-appreciation or income needs, risk-reward tolerances and ultimate portfolio goals.
This is especially true for investors managing their own portfolios. Locate an advisor / researcher to guide you, set up your portfolio according to well-established and prudent criteria and think long-term. Don’t wait for the “perfect time” to buy, it doesn’t exist. Or, as Si John was fond of saying: “The best time to invest is when you have the money”. Realize that at times when the market is at its most tumultuous, you will feel anxious and want to sell. Resist the urge, secure in the knowledge that your portfolio will regain its value and most likely then some, when the market swings back – which it always does.