I often muse about what I have learned during my 30 plus years in the investment industry. Far too many times, I’ve anticipated the end of my career due to market corrections, corporate failures and global upsets. Yet here I am, all these years later, still in the business. Life has gone on and the markets continue to climb higher.

INSTANT INFORMATION PLAYS HAVOC ON RATIONAL THOUGHT

Before this age of instant information dissemination, events were still large, but seemed to occur less frequently and with much less fanfare. It’s not that colourful commentators wouldn’t proclaim an imminent market correction (google the name: Joe Granville), or talk of an impending catastrophe (remember Y2K?). It’s that these personalities didn’t always catch the attention of the average investor or the media. And even when they did, investors weren’t immediately compelled to rush out and sell their carefully planned investment holdings.

Today, we are an event-driven, news hungry society, fed by social media experts citing reasons to buy and sell 24/7. Pending Fed meetings, OPEC meetings, and the antics of European countries are now everyday conversations around our dinner tables. Facts have been supplanted with noise. Volumes of information rather than value of information is the norm. And the problem is, this promotes emotional reaction, rather than pragmatic rationale thought.

LONG-TERM PERSPECTIVE STILL KEY

Investment managers are expected to predict the news, react to the news or comment on the news. When did the day-to-day news displace wisdom counsel and judgment on how to articulate and achieve one’s investment goals? When did we lose the discussion about what is important and the path to achieving it? How does one make sense of it all?

In my view, the purpose of investing is to convert hard earned money into long-term sustainable assets with an increasing income stream to provide for retirement or pass along to future generations. Envision planting a garden. You carefully plan it out. You plant diversified materials, depending on what works for your space, then you sit back and let it grow. The garden’s results are measured over years, not on a monthly basis. Sometimes harsh weather creates havoc and your garden requires extra attention or just some well-timed patience. But over time, the garden flourishes. Maybe not all of the original plantings last, but the strong thrive, and your continued commitment makes the end result so much more satisfying.

TIME IN THE MARKET VS MARKET TIMING


Those events we talked about earlier? They still occur and you can’t time or necessarily predict them. You also can’t worry about every single one. From a long-term perspective, most events prove to be insignificant to the process of growing capital over a lifetime, as you can see in the chart depicting the S&P/TSX Composite Price Index since 1939. Clearly, time in the market works significantly better than market timing… and it also lets you enjoy your life a whole lot more.

 

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