Volatility must be present if you are going to get a return that is higher than fixed-income products can give you.
Let’s say you own stocks and you go through a period of volatility. So you call your advisor. Let’s also say your advisor is one of the two guys interviewed in this video…
This is a good example of what we’ve been saying about financial advisors. Advisors are often worse than investors themselves when it comes to fear-based market timing because they allow you to do it and legitimize your fears in the process.
Mark Matson is kind to Greg, but Greg would sell you out based on your fear. You can hear it in what he is saying. There is no conviction about where you are today. If he pulls you out because you’re not sleeping and puts you in fixed income today, then once the market comes back up you’re still counting sheep because you’re missing out on gains. Then he would put you back in? As Matson points out, and as we’ve been saying all along, this is buying high and selling low, the exact opposite of smart investing.
It’s this back and forth – volatility – that allows disciplined investors to take advantage of their fears rather than be driven by them.
This is also a good example of how advisors know the right thing to do but are willing to cater to client fears to avoid losing him or her. He wants his clients to be able to sleep tonight. I want mine to be able to sleep every night for the rest of their lives. I want you to know what you are doing as an investor and why you are doing it.
Let me know which guy you’d rather be working with. I’m glad my money (and yours) is with Matson.