As I speak with various financial advisors, investment professionals, friends, family, etc. about the markets, I continue to reiterate that everyone has an opinion. I’ve used the phrase “nobody knows shit” (sorry for the vulgarity) multiple times in the last couple of months, so I thought I’d share my thoughts here, particularly in an environment where voices and opinions keep getting louder and louder as market volatility persists.
Next time you are listening to someone sharing their opinion on the markets, remember, its just their opinion. Next time you watch CNBC, remember, you may see one successful investor that manages billions of dollars say one thing, then 5 minutes later, you might see another well-known investment manager that manages billions of dollars say the exact opposite.
A couple of months ago, I went on a recent trip to a large investment firm’s investment conference. This firm is very well known and manages assets in the trillions. When I was there, I mentioned to other people like me and other financial advisors that I was pretty confident that there would be disagreements on the markets from the investment portfolio managers that we would hear from.
Sure enough, a credit-focused bond manager had a presentation and essentially indicated this was one of the worst environments he saw in his career. I won’t get into details here, but he was really bearish. As a portfolio manager at the firm, he has access to really smart people, the best technology, the best access to whatever he wanted to make investment decisions.
Fast forward an hour or two later, and other investment portfolio managers came out and shared their beliefs that, yes, it may be challenging in the next few months/quarters, but not “one of the worst environments” they’ve seen.
So here are other well-known portfolio managers, from the same firm, with the same great access to people and data, and they have come to different conclusions than the much more bearish, well-known portfolio manager.
I was recently asked multiple times, who I “follow” from an investment knowledge standpoint. I always respond that everyone has an opinion, so following one investment “expert” isn’t very helpful. Even though I’m in the business and people pay me a lot of money for my insights and management of investment strategies, they shouldn’t even be just listening to me either.
As someone who performs manager due diligence on investment managers across asset classes and manages multi-asset investment portfolios, I’ll take in insights from various sources: investment manager opinions, economic data, TV personalities, other financial advisors, friends, etc. The difference is, at least from my standpoint, is knowing that everyone has an opinion and no one is right all the time, so don’t put too much weight into any opinion or investment strategy. Remember, there are different types of investors (see the Types of Investors lesson), so you have to take that into account as well.
So think about this, if you can’t get agreement from really smart portfolio managers, from firms that manage assets in the trillions of dollars, with access to the best minds and technology in the business, who are you going to listen to to make your own investment decisions?
Rather than trying to figure out what the “best minds in the investment industry” are thinking and making investment decisions based on that and getting disappointed when they are wrong and then you giving up, consider focusing on figuring out your own investment style that you can stick with, get your risk level consistent with your risk tolerance, figure out market environments that you can get excited about adding risk to rather than getting emotional and selling out after the market sells off, or overly excited when markets move higher. Then when parts of your portfolio get out of balance, then rebalance. Simple.