Use a proven investment process

An effective Investment Management process should be an investors primary consideration. If you are not using one you will need to ask a professional.

Time and time again forecaster try to predict what will happen in the future to Stock Markets. In reality, nobody knows what Markets will do next.

The Wall Street Journal in the US recently published an article about the performance of Global Stocks and Shares. The article was called, “Global Stocks Post Strongest First Half in Years, Worrying Investors.”

“The question for stocks and shares investors is whether the strong first six months of 2017 heralds a choppier second half or the start of a multiyear upswing. The data on global rallies offers a mixed record.”

In plain English, this means:

“It’s impossible to predict whether markets will go up or down for the latter half of the year. Markets could go up or down or even trade sideways.”

The newspaper article also reported that: “Most of the major stock Market Indexes, 26 in total have risen in value so far in 2017. The last time this happened was in 2009.

An alternative question about your investment portfolio

At Consilium we often ask ourselves how to interpret the data about this recent performance? Are certain Stock Markets overvalued? Will interest in some countries rise? Are these mixed signals?

The article suggested that the recent strong returns should worry investors rather than celebrate them.

It’s impossible to give a correct answer to a question where nobody really knows what’s going to happen over the remaining six months of 2017.

Investors should really be asking themselves the following question:

Does your low-cost globally diversified portfolio still reflect your goals and risk tolerances?

If the answer is yes, that’s great news. There is no guaranteed investment approach that you will make money investing. As Nobel laureate Eugene Fama has observed, “The probability that you can lose money never goes away … It’s the nature of the beast.” That said, you are already doing all you can to capture expected market returns while managing the risks involved.

However, what do you do if you are not sure if your investment portfolio is on track or if you are taking too much risk? Perhaps your own goals have changed. Or even, you have not have rebalanced your portfolio in some time and the level of risk you are taking may have significantly increased? That’s good providing the assets that have performed well continue to do so. If they don’t then your portfolio could be exposed to significant downturns in its value if markets fall.

Prudent Investment Advice requires a disciplined investment management process that should be continually reviewed and monitored. It should be documented and include rebalancing investments on a regular basis to control risk and keep your financial plan on track.

If you ask us, that’s a better question than what the rest of 2017 has in store for us as investors.  For all the clever ways there are to phrase a forecast, that’s anybody’s guess.

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