CAN YOU SLEEP THROUGH THIS STORM?

An investor came to me for advice this week saying, “I spend all day long watching every show, joining every webcast and following every analyst I can find, and I’m still confused and don’t know what to do.” I responded that if I did the same thing, I wouldn’t know what to do either. 
 
I get tired of analysts blabbing all day long about what is happening and what to expect while displaying their graphs and market recovery curves, as if they know anything. They talk about resistance and support levels, which are by design, conveniently moving targets that assure the analyst will always have work tomorrow. The fact is that no one knows where the market is going tomorrow or next month and anyone who pretends to know is either a fool, or has fools for followers.
 
That may sound harsh but consider this. If you had a system that could predict with any level of accuracy, (anything over 51% would work) which way the market is going in the short term, what would you do? Would you hire on at an investment firm for an $114,000 salary – the average for analysts. Or would you keep your graphs to yourself, mortgage your house, borrow from your in-laws, and become a billionaire in just a couple of years by applying your secret? The reason analysts take the salary is because they can’t forecast the future and they know it. As the great investor Peter Lynch said, “Charts are great for predicting the past” as well as “If you spend 13 minutes listening to analysts, you’ve wasted 10 minutes.”
 
I often gain perspective from the story of Rip Van Winkle. Rip fell asleep when the country was struggling under King George III. He awoke 20 years later to a free and prosperous country, having peacefully slept through the American Revolution with its terrible fear, suffering and sacrifices.
 
I equate some of todays panicked investors with recent shoppers who were hoarding toilet paper as the crisis began. Were the winners in the battle the ones with the bloody noses, proudly leaving the store with their case of TP, or the ones who were quietly at home because they had enough stored up before the crisis began? If one thing comes from this crisis I hope we learn to slow down a bit and plan better. Is your portfolio setup in such a way that if a crisis hit, you would still be able to sleep peacefully while others are running around in panic trying to find answers?
 
I am a firm believer in attempts to maximize returns by careful planning and regular adjusting of investments. But I also believe that when a crisis arises, the winners will not be the ones who spend long hours watching analysts with their walls of mostly useless graphs, but the ones who were already well positioned before the crisis began. The latter will enjoy a much better sleep while the world panics around them. If not this time, be that investor next time.