Fools Game Investing
The short run is unpredictable. The long run isn’t.
What This Means
Stop trying to call tops and bottoms. It’s usually a waste of time — and potentially money.
The market doesn’t reward investors for making great predictions. It rewards investors for staying invested and participating in long-term growth.
A lot of investors spend their time trying to answer questions like:
- Has the market peaked?
- Is the correction over?
- Should I wait for a better entry point?
- Is now the bottom?
The problem is that markets are incredibly difficult to predict in the short run.
There are times when the market looks due for a correction and it keeps moving higher. Other times it appears to have found support, only to break lower again.
After watching markets every day for more than 20 years, I’ve learned that getting one or two of these calls right doesn’t really matter. Playing that game is not a process you can successfully repeat for decades.
Business owners understand this concept well. Successful businesses aren’t built by perfectly predicting what next month or next quarter will look like. They’re built through consistent execution over long periods of time.
Investing works the same way.
Instead of trying to predict every market move, we’d rather focus on staying invested, identifying strong areas of the market, and allowing compounding to do its job.
The irony is that while the short run is highly unpredictable, the long run has historically been much easier to understand.
Markets go up.
At PureVest, we’d rather spend our energy building a plan, following a process, and moving closer to the point where work becomes optional.
That’s a much better use of time than trying to guess tomorrow’s market move.
Common Questions
Why is calling market tops and bottoms so difficult?
Markets can stay higher, lower, stronger, or weaker far longer than most people expect. But the longer the time frame, the more those short-term movements tend to smooth themselves out.
What do investors overlook when trying to call market tops and bottoms?
Two things.
First, selling can create taxes. Many investors focus entirely on whether they can buy back lower and forget that capital gains taxes may create a hurdle that needs to be overcome before the strategy even works.
Second, you don’t have to be right once — you have to be right twice. You have to know when to sell and when to get back in. That’s a much more difficult task than most people realize.
Remember This:
Stop trying to predict. Start trying to participate.