Are You Prepared for the Coming Market Correction?

Equities have been rising almost uninterrupted in 2017. In the year to date:

TraderThe S&P has advanced nearly 15%, with 242 days since it last dipped 3% or more…

The Dow has had 34 record finishes…

Japan’s Nikkei 225 is at the highest level since 1996, after a record 15 consecutive days of gains…

And the FTSE100 recently enjoyed a four week gaining streak…

As a result, and 30 years after ‘Black Monday’, many news sources are predicting a bumpy ride for the markets. Is a market correction imminent?

So, now’s a good time to consider two things:

The things successful investors focus on, and

The things they ignore…

Successful investors ignore what they cannot control

The one thing that matters to all investors is the one thing no-one can control…

The markets.

However, there’s always someone willing to have a go!

Take Michael Hartnett, Chief Investment Strategist of Bank of America Merrill Lynch who was the latest to warn of the coming market correction by February.

He may be right, he may be wrong – but successful investors will ignore him.

A Harvard Business Review article dating back to 2009 explains why:

“The future, like any complex problem, has far too many variables to be predicted. 

Quantitative models, historical models, even psychic models have all been tried — and have all failed.

Just imagine predicting something far simpler than the future of the stock market; say, chess.

There are an overwhelming 10 to the 120th power possible moves.  That’s a 1 followed by 120 zeros…that sum far exceeds the number of atoms in the universe.”

In other words, successful investors don’t try to predict the market or listen to those who believe they can – because it cannot be predicted.

Instead, they get in the market and stay in the market – no matter which way it may be heading.

What do successful investors focus on? Thing You Can Control

This illustration by Carl Richards explains successful investors should only focus on the things that matter that they can control:

As a successful investor, you want to ensure:

  • you are receiving professional advice on a fee only basis, with your adviser unconflicated by commission and providing advice that is in your best interest
  • you are not paying hidden charges that are eroding into the performance of your investment or pension
  • you are not tied into outdated, inflexible, life insurance products which have hidden redemption penalties
  • you are not invested in alternative, esoteric investments or structured notes that promise a good return but under-perform and often put your entire capital at risk


Advice to take away…

If you worry about things you have no control over, you are likely to be a less successful investor, and more likely to experience stress.

  • But, if you heed Carl Richards’ advice and only focus on things that matter that you can control;
  • And you get in the market, stay in the market and ignore the market;
  • You stand the greatest chance of achieving investment success.


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