Every conversation I have with clients, friends, associates, and family members goes like this.
Question: “What do you think about the market right now?”
Answer: “Can you be more specific?”
Question: “Sure. Do you think the market going to crash?”
Answer: “Yes.”
Question: “When?”
Answer: “I’m not sure.”
Question: “What do you mean you’re not sure, aren’t you a market expert?”
Answer: “That depends on what you think a market expert is.”
Question: “A market expert is someone who knows when the market is going to crash.”
Answer: “Then I’m not a market expert.”
Question: “But you’ve spent your entire career in the investment business. How do you not know when the market is going to crash?”
Answer: “The value I give to my clients is not a prediction of when the market will crash.”
Question: “Then what is it exactly that you do for your clients?”
Answer: “I monitor the condition of the economy and the stock market, and report on that.”
Question: “How does that help me?”
Answer: “If you’re paying attention you will reduce your risk exposure when conditions are deteriorating and increase your risk exposure when conditions are improving.”
Question: “Is it really that simple?”
Answer: “Yes it is.”
Question: “But I read that it’s impossible to time the market and the best way to invest is to buy and hold, regardless of what the market does.”
Answer: “If that approach works for you, that’s great. But my clients would rather have a contingency plan in place for dealing with bear markets.”
Question: “Isn’t that the same thing as market timing?
Answer: “No. Market timing is switching from 100% invested to 0% invested, based on some kind of signal or trigger point.”
Question: “O.K. I get it. Your strategy is incremental risk reduction based on current market and economic conditions.”
Answer: “Precisely.”
Funny yet deep conversation!!
The 2 messages were abundantly clear…
Enjoyed it Erik.
Thank you, Pranay.