They go up, they go down they go all around and they end up spinning us all into a state of wonder. We see movies made about traders, brokers and money makers.It is slick, quick and all very appealing.
Whether you should dabble in the art and science of timing the markets yourself, or invest for time in the markets, is a bit like asking whether you want to live a life of short term relationships or be married.
Porn is exciting, enticing and gets you all hot under the collar. Not dissimilar to the markets really. But married life, the stuff that is of real value to you when you grow old and look back on your life, is more like the slow and steady game of investing for the long term.
The truth is that slow and steady really does win. Warren Buffet does not make billions because he is at his computer every day shouting “buy, buy, buy, no, no, sell, sell, sell”. That is for people who make money from buying and selling investments. Chasing returns is a convenient investment strategy for those that make money from constantly changing investments. No, Warren Buffet makes money by identifying what investments have real long term potential and then holding them for a very long time.
This classic chart shows you how hard it is to try and work out which investment sector will be the best next year. (Click on the chart for a better view).
The figures are based on US data but are relevant for all investors. They show how volatile each individual sector can be in terms of performance and ranking. Trying to navigate your way through each year is literally a full-time job, one that you may or may not get paid for.
Holding a balance of all of these sectors in the proportions that are right for your desire and need for returns, and then holding those through thick and thin really is the most reliable way to earn returns.