In 2018 investors were nervous because markets were up, and you may have forgotten but in 2019 markets were down so investors were nervous too (markets were down around -10% over October-December 2018). As I’ve pointed out previously, it doesn’t matter whether markets are up or down, you’re always going to be nervous.
So should you start investing or add to your portfolio in 2020?
I could talk to you about averages, as the market has a track record of going up three out of every four years. However, the dangers of looking at averages this way is perfectly captured in one of my favourite lines from Howard Marks:“Never forget the 6-foot-tall man who drowned crossing the stream that was 5 feet deep on average.”
There is always a chance markets could go down, but good decisions don’t always have good immediate outcomes. Professional poker player Annie Duke calls this “resulting”, basing the ‘goodness’ of a decision on just one (and possibly insignificant) result.
Focusing your investment decision on what the next 12 months may look like is like focusing your attention on who is going to be leading a marathon at the 100m mark. Or those who celebrate the horse that’s leading the Melbourne Cup on the first lap.
It’s not about that. it’s about the bigger picture.
In 2019 we’ve had a lot of noise: Brexit, Trump’s trade war with China, an election here at home (with a result that most didn’t see coming) and even an impeachment over in US. You’d be pretty naive to think that there won’t be more noise ahead in 2020 too.
Six Park uses the best of technology to provide our service at a low cost, but there is a real human overlay in the form of our Investment Advisory Committee, which meets regularly to monitor what’s going on around the world. Donald Trump, Boris Johnson, Kim Jong-un, Xi Jinping, interest rates and others have all been on the watch list of the Six Park investment advisory committee for a while now and it’s unknown what we’ll see and hear from these international leaders in the year ahead. Whatever the headlines may be, asset allocations of Six Park’s clients portfolios will continue to be monitored by our investment committee.
There will be ups and downs along the way, but we do know that over time markets trend up. Furthermore, a well diversified portfolio with an appropriate level of growth and defensive allocations for your risk profile will provide a real level of resilience.
I recently read that the number one day for people searching property on REA and Domain is the 1st of January. New Year represents an opportunity to do things you may have been putting off for a long period of time, including living a healthier life or getting started as an investor.
When it comes to investing, I’m not sure what lies ahead in 2020 and dealing with uncertainty is never comfortable. But it’s not just about the next 12 months - it’s about the bigger picture.
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This content has been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned in this article, consider whether it is appropriate to your own objectives, financial situation and needs.