What To Do Now?

This is probably a question that many on the sidelines are asking themselves having missed the final quarter rally in equity markets. To be honest it is actually an extremely difficult question for a multitude of reasons.

1. There is the eternal question of have you missed the boat?

2. What happens if the market stalls the moment you enter?

3. What happens if it doesn’t stall and still keeps going and you still are not on board?

All of these are possible outcomes and since no one knows the future you need to assume that they are all equally possible. The alternative I want to concentrate on is what happens if the market keeps going and you are still not on board since I regard this as potentially the most destabilising outcome for most investors/traders.

I accept that there is an entire class of market participants for whom participation is not of  importance. What is of major importance to them is annoying me at lectures by telling me that they predicted the GFC and would have made millions but didn’t because they couldn’t borrow them Mums 1985 Corolla to go to the ATM to take out their vast fortune out of the bank and transfer it to their special secret Swiss bank account which seems to only offer accounts to sad middle age men wearing cardigans. But they did predict the GFC and would have made millions…….

I am assuming you are not one of these and are genuinely concerned about entering a market that had a reasonable relative lift in 2012. However, the lift in 2012 needs to be put into context. The ASX 200 began 2012 at 4069 and with glacial slowness dragged its way to a high of 4448 at the beginning of May. The market then stayed below this point until October and even then the lift above this point was short lived. The real gain in the ASX 200 came in a six week period at the end of the year. The rest of the year was a bust.

This context is important because it shows that you have not missed a year but rather six weeks. Now, consider the bull run before the GFC – this run lasted for 241 weeks give or take. The current market has run for six, the previous major run was for 241 weeks or about 40 times the duration of the present run.

Any decision to enter a market is a personal one and needs to reflect each individuals aims and aspirations. But the somewhat breathless I’m ever so damp carry on of financial commentators about the current market simply fails to understand the historical context of the current move. Mindless cheer leading does no one any good. There is always time to take a breath.