Key Takeaways:
- Just like fishing conditions, markets are also virtually impossible to predict consistently.
- Investing for the long-term and consistently rebalancing helps to reduce the uncertainty of the markets and put investors in the best position to succeed.
- Market timing is not a reliable method for fishing, or investment returns.
Fly fishing is a captivating sport because perfection is impossible. While it is true that with experience you can catch trout on almost any day, it’s also true that under the right conditions and for short periods of time, you can catch trout almost every minute.
However, if the fisherman (or woman) could predict the timing of the best fishing conditions, the sport would lose much of its allure.
The difficulty in catching fish lies in the difficulty we have in predicting exactly when the optimal fishing conditions will exist. In my experience, fishermen have a hard time even agreeing on the characteristics of the perfect conditions let alone predicting them. Unpredictable variables such as air temperature, water temperature, water flow, atmospheric pressure, water clarity, and cloud cover all affect whether or not the trout are likely to be eating.
But sometimes the conditions are close to perfect. I was lucky one day last year. I experienced near perfect fishing conditions and caught it on video.
Capital markets are very similar to a stream in many ways. There are unpredictable conditions that can affect whether or not the experience of the investor is positive or negative. These conditions vary greatly from day-to-day, and even from moment to moment. Moreover, even professional investors can’t agree on what makes perfect market conditions let alone predict the future.
The Remedy to Variable Conditions
For those of us who love to fish, the remedy to variable conditions and short sharp periods of unforeseeable activity is to spend more time on the stream and have your line in the water as often as possible. There is simply no substitute for being there when the magic happens.
For the investor, the remedy is also to “be there.” Maintaining a patient exposure to the capital markets is the evidence-based method of producing the most reliable returns over time. Market timing just isn’t a reliable method of fishing for returns. For more information on producing more reliable returns through Evidence-Based Investing, please visit our website.