| Long-Term Strategy Doesn't Depend on Forecasts.
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December 6, 2011 |
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| 2012 Investing Forecast |
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The Tip:
Gloomy economic forecasts shouldn't affect your investing strategy.
Have you been reading the investing forecasts for next year? The most optimistic forecasts expect more of the same—slow economic growth, a stock market that's vulnerable to every little hiccup, continued high unemployment and a sluggish housing market.
A recent poll shows that most people agree with the "experts" about next year's economy. More than 70% believe it will stagnate or fall back into recession. As a result, most people say they will keep their investing strategy the same or less aggressive than it was this year.
What a relief to follow a long-term retirement investing strategy like Dave's that doesn't depend on any forecast at all! Disciplined mutual fund investing is all it takes to build wealth, and it doesn't matter what the experts predict for next week, next month or next year.
Legendary Perspective
In his 1994 letter to Berkshire Hathaway shareholders, legendary investor Warren Buffet put it this way: "We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen." He went on to describe some of the turmoil the world had endured during the previous 30 years and noted that none of those events impacted the investment principles he followed.
He concluded by saying, "A different set of major shocks is sure to occur in the next 30 years. We will neither try to predict these nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external surprises will have little effect on our long-term results."
While Warren is talking about investing in businesses, his advice holds true for growth stock mutual funds as well. Market volatility like we've seen the past couple of years rarely has a long-term effect on mutual funds with a solid history of strong returns.
If you've been thinking you should change your strategy to be "less risky" or hold off investing until the market is "more stable"—don't. Stick to your investing plan and ride out the temporary ups and downs. As Warren points out, they will have little effect on your long-term wealth-building results.
Get Started Now With Professional Advice
Don't let dreary market predictions keep you from investing for retirement. Consult an investing professional with the heart of a teacher like one of Dave's investing Endorsed Local Providers (ELPs). Your ELP is an experienced financial advisor who will give you the same great advice Dave would. Contact your ELP today!
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