I think that many advisors try to make predictions without any basis and may be overly optimistic. They use traditional “buy and hold” methods when it comes to investing. In other words, they suggest you buy and hold stocks for the long term. But the fact is, this hasn’t worked for the past ten years. Buy and hold may work over a long period of time (20 years) but for most of us, such long time frames are meaningless because we need access to money to fund our retirements sooner than that. So we can use a buy and hold philosophy for a part of our money, but we need to have more active management that can get us completely out of stocks when the market is bad in an effort to preserve capital.
So rather than be overly optimistic or pessimistic, we need to be neutral and flexible. We need to have various methods of investing in place so that we’re prepared for whatever the markets may do. It won’t be perfect, but it will be a thoughtful and flexible approach that attempt to limit volatility and reduce losses. We may give up some upside if the market goes straight up, but we’ll be more prepared if things get rough.
I believe the economy is in a transition phase that may last for many years. That’s not necessarily bad news for investors, but it does mean that we need to manage our money more actively rather than passively to try to capitalize on the good times and minimize the impact of the bad times.