Noah Didn’t Yield To FOMO, Neither Should You

The first graph shows that the S&P 500 cycles between periods of strong returns and weak returns. Currently, returns for the last ten years are at the upper end of the range, portending weak forward returns.

fomo, Noah Didn’t Yield To FOMO, Neither Should You

The following graph uses four valuation techniques to highlight that returns are likely to be flat to negative over the next ten years.

fomo, Noah Didn’t Yield To FOMO, Neither Should You

The following quote is from our article Zen and the Art of Risk Management:

“When markets are frothy and grossly overvalued, greed takes over, leading to lofty performance expectations and excessive risk stances. Equally tricky is buying when fear grips the markets.”

“In both extremes and all points in between, we must maintain investor Zen. The best way to accomplish such mindfulness and awareness of market surroundings is to understand the risks and rewards present in markets. Zen-like awareness allows us to run with the bulls and hide from the bears.”

Summary

TINA is another popular acronym – “There Is No Alternative.” Despite popular logic today, there are alternatives to blindly employing passive strategies that will fully partake in the upside but leave investors facing significant downside risks.

As a steward of our client’s wealth, we take special care at market junctures like the present to understand the risks. Timing the market is impossible, but full-time awareness of the long-term goals will help our clients avoid the pitfalls that inevitably set investors back years.

Equally damaging for passive investors when the tables turn is the inability to take advantage of the multitude of opportunities that emerge when fear reigns market sentiment.

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