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I am looking forward to sharing more information regarding investing, finance, economics, and general knowledge about the financial services industry in 2020. I am hopeful to increase the pace with which I publish new information. Additionally, I am happy to announce that I reached viewers in 108 countries in all six continents. Countries from Japan, France, Germany, and Russia to Ghana, Colombia, and even Nepal.
Since the number of my international viewers has grown to nearly 30% of overall viewers of this blog I wanted to allocate a short potion of this post to the international community. Some of my comments are most applicable to the US financial markets or the developed markets across the globe. If you are living in a country that is considered part of the developing markets, I would strongly recommend that you seek out information in your country to see how much of my commentary is applicable to your stock or bond market and situation in general. It is extremely important to realize that tax structure, transparency of information, and illiquidity of stock and bond can alter the value of what I might say. During the course of the coming year, I will attempt to add in some comments to clarify the applicability. However, as the aforementioned statistic regarding the global diversity of viewers of this blog suggests, I would be remiss if I did not acknowledge that I will not hit on all the issues important to all international individual investors.
I encourage you to take a close look at your portfolio early on in 2020. It is a perfect time in terms of naturally wanting to divide up investing into calendar increments. As you listen to all the predictions for the New Year, I would encourage you to look at your personal portfolio and financial goals first. The second step is to always look at that economist’s or analyst’s predictions at the beginning of 2019. Now I am not implying that incorrect recommendations in the previous year will mean that 2020 investing advice will be incorrect as well.
To help you with a potential way to look at the outlook for positioning your portfolio of investments, I recently published a summary on the topic of rebalancing a portfolio. You can find the link below:
Now, there will always be unknown items on the horizon that make investing risky. You hear that we need to get more visibility before investing in one particular asset class or another. It usually means that the analyst wants to be even more certain how the global economy will unfold prior to investing. I will remove the anticipation for you. There will only be a certain level of confidence at any time in the financial markets.
One can always come up with reasons to not invest in stocks, bonds, or other financial assets. The corollary also is true. It can be tempting to believe that it is now finally “safe” to invest even more aggressively in risky stocks, bonds, or other assets. As difficult as it might be, you need to try to take the “emotion” of the investing process. Try to think of your portfolio as a number rather than a dollar amount. Yes, this is extremely difficult to do. But I would argue that it is much easier to look at asset allocation and building a portfolio if you think of the math as applied to a number instead of the dollars you have. Emotional reaction is what leads to “buying high and selling low” or blindly following the “hot money”; that is when rationality breaks down.
Here is an experiment for you to do if you are able. There are two shows I would recommend watching once a week. The first show is Squawk Box on CNBC on Monday which airs from 6:00am-9:00am EST. The second show is the Closing Bell on CNBC on Friday afternoon which airs from 3:00pm-5:00pm EST. You only need to watch the last hour though once the stock and bond markets are closed. Note that these shows do air each day of the week. Now depending on whether or not you have the ability to tape these shows first and skip through commercials, this exercise will take you roughly 12-16 hours throughout the month of January. You will be amazed at how different the stock and bond markets are interpreted in this manner.
When you remove the daily bursts of information, I am willing to bet that you will notice two things:
Firstly, Friday’s show should demonstrate that many “experts” got the weekly direction of the market wrong. It is nearly impossible to predict the direction of the stock market over such a short period.
Secondly, Monday’s show should illustrate what a discussion of all the issues that have relatively more importance are. However, this is not always a true statement though. Generally though, financial commentators and guests appearing on the show will have had the entire weekend to reflect on developments in the global financial markets and current events. Since the stock, bond, and foreign exchange markets are closed on Saturday and Sunday, there is “forced” reflection for most institutional investors, asset managers, research analysts, economists, and traders. The information provided is usually much more thoughtful and insightful.
I believe that the exercise will encourage you to spend less time attempting to know everything about the markets; rather, it may be more helpful to carefully allocate your time to learning about the financial markets. After you devote your time to watching CNBC in this experiment, I recommend one other ongoing personal experiment. Try picking three financial market guests that appear on CNBC during January and see how closely their predictions match reality. You might want to check in once a month or so. I think that this exercise will show you how futile it is to try and time and predict the direction/magnitude of the stock market and other financial markets too (e.g. bonds and real estate).
Best of luck to you in 2020! As always, I would encourage anyone to send in comments or suggestions for future topics to my email address at firstname.lastname@example.org.