What will 2018 hold? Our natural curiosity about the future makes a ready-made market for media articles about events likely to drive financial markets next year.
But the assumption behind this seasonal coverage is that the mere turn in the calendar from one year to the next justifies overhauling your investment portfolio, generating significant turnover and unnecessary cost.
Against that background, here are 10 perennial New Year headlines to watch out for:
- “New Year, new portfolio”: This trades off your desire for reinvention. The assumption is your investment strategy can be updated like your wardrobe.
- “Different times, different strategies”: This assumes a changing world makes diversification and discipline redundant. Tempted? Look at last year’s forecasts.
- “Brace for uncertainty”: What’s new? Brexit, Trump, North Korea: There are always headlines. If everything was certain, there’d be no risk (and no return).
- “Interest rate fears mount”: A perennial media space filler. Market expectations are already incorporated into current prices, so why bother speculating?
- “Ten stocks to count on”: Remember when ABC Learning Centres was being sold as a ‘VIP’ stock? Nice party game, but no basis for an investment strategy.
- “The world has changed forever”: Actually, our world is always changing. Economies rise and fall. The rules for dealing with that haven’t changed at all.
- “The right moves to make right now”: This popular headline assumes there is a perfect time to invest, even though the evidence for market timing is negligible.
- “Make your portfolio bulletproof”: The truth is no portfolio is bulletproof. Some parts will do well, some will do badly. That’s why you diversify.
- “Invest with the stars”: Stars rise and stars fall. While everyone loves a winning stock picker, how many of them repeat? Not a good basis for investing.
- “Take charge of your wealth”: Do you really want to be playing the currency market from your spare room? Alternatively, hire an adviser and get your life back.
What you do with your investments shouldn’t change according to seasonal news, but according to your own needs, goals and risk appetite. In any case, these decisions are better made under the guidance of an adviser who understands your circumstances.
That’s a better foundation for a happy new year.
Speak to your financial adviser to ensure you are meeting your investment strategy.
Source: Dimensional