>One of the personal market indicators I use is when certain clients, even with our best coaching, call to express a desire to get out of the market. Recently, two new names were added to this very short list. The week after those calls, the market had the best week in about a year. The good news is they stayed invested. What is interesting is that their reasons were based on the “news”, however they could not be specific on who said what and what was the reason for their concern.
This is a perfect example of why investors complain that they never make money in stocks. It is not the portfolio; it’s the investor’s wrong assumptions and poor timing. We sponsor the educational workshops on investing to help clients and their friends understand how markets really work. Incidentally, the two callers have never attended a workshop.
I am perplexed by how many non-coached investors are buying bonds over equities. I have yet to find the rational that with the 10 year yield being around 3% why would anyone tie their money up for that period for only 3%?
On the other hand why would someone by a 5 year CD at 2.5%? Inflation is going to rise and the loss of purchasing power with a CD is astounding.
An academically based asset allocation has a better chance of rewarding the investor with gains than one fully allocated to fixed income. Right now, I view the risk of loss of capital over the next twelve months greater with bonds than I do equities. I view the market undervalued at this point and see many investing opportunities. Don’t let the talking heads cloud your judgement, remember that they are made up mostly of journalists who have no idea on what the real world is all about.