Investor ‘Fear’ Destroys Portfolios
An often heard phrase “Markets hate uncertainty.”
I disagree, markets thrive on uncertainty. The more certainty there is, the lower the expected return. The more certain the markets, the lower rate of return. Uncertainty rewards investors for the risk taken. Investors should not fear volatility, but embrace it, and use it to your advantage.
Right now, the current rate on a 5-year CD is about 1.36%. Once inflation and taxes are taken into account, the CD holder actually losses money. This is a good example of “certainty.” That is not the way to invest. The markets, a globally diversified portfolio, will reward investors for the risk taken, lower volatility, and produce returns over inflation in the long term.
Investors should not worry about short-term fluctuations, but keep your eye on the future.
As the great hockey player Wayne Gretzke once said, “I skate to where the puck is going, not to were it has been.”
The S&P500 and the Dow are up 91% since the market low of March 9, 2009.
There is plenty of growth in the future. So skate to it!