Recently we have been seeing a lot of headlines about how expensive the market is and predictions that it is about to fall significantly. This is also coupled with many mentions of rising inflation. Such headlines filled with dire predictions and economic concerns can make investors anxious and fearful.
At times like these, the best thing to do is take a deep breath, gather all the facts and take some time to reflect on the situation and decisions at hand.
For example, while many forecasts are confidently predicting the markets next move, they don’t state how frequently their predictions are wrong. They may be very confident in their forecasts, but a study of over 6,500 market predictions found them to be accurate less than half of the time1.
Increasing inflation does not need to be feared. It doesn’t guarantee the market will go down. In fact, since 1928 the markets have averaged positive investment returns in years of both decreasing and increasing inflation rates2.
After we gather the facts, it is important to take time to reflect. We should consider all of the possible outcomes, including the cost of being wrong. To practice mindfulness when making investment decisions, we should:
Gather all the facts – not just those at our fingertips.
Consider all the possible outcomes – not just ones we hope for.
Consult with your advisor.
I do believe inflation will gradually tick up. It will not be doom and gloom. It will just cost you more money in the future to purchase gas, food, and other essentials in years to come. To offset inflation, we invest to generate real returns (returns above inflation) to keep your purchasing power growing. We have recently proactively added TIPS (treasury inflation protection securities) and REIT’s (Real Estate Investment Trusts) to many or our strategies. TIPS values increase as CPI goes up. REIT’S can raise rents in inflationary environments. Both are excellent inflationary investments.
I am here to help you along your investment journey. Anytime you have concerns, questions about something you read or heard, please let me know. Allow me to provide you all the facts so you can make a thoughtful and deliberate decision. Please call our office or schedule a 15 minute quick call with me on our website www.promontoryfp.com whenever you have questions.
©2021 The Behavioral Finance Network. Used with Permission.
Source: CXO Advisory. https://www.cxoadvisory.com/gurus/
Source: A Wealth of Common Sense, March 22, 2021. Returns are average returns for S&P 500 Index from 1928 – 2020. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly.