Children playing field 2

What's a Mother to Do?

Children playing field 2

Yahoo!'s Daily Ticker is one of the few financial Websites that I make a point to visit on a daily basis. The three to six minute interviews and commentaries are always entertaining and sometimes very informative, like this one here. Today's visit greeted me with the following headlines:

"The Fed Will Fail and Take the Private Economy Down with It"

"There Are Bubbles All Over, Hide in Cash"

"The Dow Will Surpass 16,000 This Year"

"Stocks Are Cheap and Can Go Higher Despite Sub-Par Growth"

"Dow 20,000 Is Coming in 2014 or Early 2015"

"Loving This Market? You've got it All Wrong"

Faced with multiple contradictory opinions, investors who are paralyzed with confusion are hardly to blame, especially since most of these opinions are intelligently and articulately presented. It reminds me of the old joke from Fiddler on the Roof when Avram says, "He's right, and he's right? They can't both be right." To which Tevye responds, "You know…you are also right." 

Seriously speaking, most investors would be better off by simply accepting the idea that all of us together (i.e., the market) know more than any single one of us alone. Putting this idea into practice would entail accepting that market prices for heavily traded financial assets are fair prices in that they incorporate an expected return that is commensurate with the risk undertaken. The primary question an investor needs to ask himself is, "How much risk is right for me?" Once the answer is determined, a globally diversified portfolio of low-cost index funds should be utilized to achieve the desired risk exposure. A question that is likely to lead to an unhappy outcome would be, "Is now a good time to be in the market?" Unfortunately, that is the very question that is usually addressed by the pundits on Daily Ticker, CNBC, et. al. The services of a passively-oriented investment advisor can be invaluable in both implementing an appropriate portfolio and keeping an investor in her seat, regardless of what happens in the market and what the pundits are saying about it.

While we at Index Funds Advisors, Inc. cannot claim to give you the same level of sage advice that you hopefully received from your mother, we can help you shut out the cacophony of conflicting and sometimes harmful advice that is proffered in the financial media.