There is no present tense in investing (or much else)

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Nick Foy, CFP®

With some regularity, clients or prospects attempt to take a question that is inherently past tense and flip it into the present tense in order to decipher an unknowable future.

The question often goes something like this: “What are the markets doing?”

I don’t blame them. Attempts to predict the future in an effort to make some extra coin, or at least to feel more secure, are popular. The media does it all the time.

The trouble is, the markets aren’t doing anything.

Charlotte home prices aren’t rising.
Suicide rates aren’t increasing.
Alberta’s economy isn’t improving.

Markets have done. Home prices rose. Suicide rates increased. Alberta’s economy didn’t improve. Each of those events was able to be analyzed because they already happened. But, those events have no impact on what’s going to happen.

Tomorrow, home prices might fall. Suicide rates could decrease. Alberta’s economy might improve.

There are choices that we made that affect our present, but they should have no impact on our future choices.

In the world of finance, there are certain things that we know about the way that markets behave, and they inform our future expectations and choices.

We expect stocks to outperform bonds, over the long-term. We expect appropriately functioning capital markets to produce additional wealth. We expect investors who pay less to invest than their peers to earn a higher relative rate of return. We expect those investors who take on appropriate risk to be compensated for the risk they take.

In the near-term, we don’t know much, and that’s not necessarily a bad thing. But let’s not try to take those things that are in the past and turn them into the present in order to predict the future


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