The first half of 2014 is coming to a close and we recently ushered in summer and baseball. It would not be the beginning of baseball season (or any sport for that matter) without the baseball “experts” pontificating about which team will prevail at the end of the season. This is the part that always makes me smile. How in the world can anybody know today who is going to win the World Series in October?
The baseball season is a marathon, as teams play 162 games during the course of the regular season. With so many variables in play, there is absolutely no way that any expert, let alone an ordinary baseball fan can determine with any degree of certainty which team will be crowned the World Series champion. While it might make for good television ratings, would you want to attempt to pick a winner at the beginning of the season and be tied to that selection at the end of the season? I would surmise the answer to the question would be, absolutely not. What if the star player gets hurt? What if the brilliant rookie prospect turns out to be a bust? You are stuck riding that selection into the sunset. Why then, would it make sense to invest your money that way?
At any time you can find financial experts on television talking about why this stock or that stock is going to be the best performing over the next five or ten years, or even over just the next year. Think about how much can change in just a year’s time, let alone an entire decade. From the beginning to the end of 2008 the S&P 500 lost 38% of its value. Similarly, from the beginning to the end of 2009 the S&P 500 gained 23% . Those are just one year time periods. Think about ten years. Who would have imagined in 1999 that the decade of 2000’s would post the first decade loss for the Dow Jones Industrial Average since the 1930’s? This is why it is so important to have flexibility in the financial markets, and more importantly a logical, organized game plan for navigating the markets.
In today’s complex markets, one needs an approach to investing that is instead based upon finding leadership in the market, and attaching a discipline that offers rules for accepting that a trend is working or no longer working. An approach that is based upon the irrefutable economic principles of supply & demand, and dictates that we adapt into assets controlled by demand and away from those controlled by supply. In the end, this philosophy means that while others spend their summer predicting, we spend the 12 months of the year listening to the market and adapting to changes.
This article was written by Dorsey, Wright and Associates, Inc., and provided to you by Wells Fargo Advisors and Charles Tumlin, Financial Advisor in Beaufort, SC, 211 Scott Street, 843-524-1114. You cannot directly invest in an index. Wells Fargo Advisors did not assist in the preparation of this article, and its accuracy and completeness are not guaranteed. Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE. Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.