Q. With all the Trump turmoil, what international investments should I avoid? And which should I buy?
— Looking for opportunity
A. Ah yes. Something in the new cycle is making investors question what they should do now.
That’s a dangerous business.
“I am always amused about how people work so hard to try to figure out where the market is going and they are usually so horribly wrong,” said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.
He said for example, pundits said if Donald Trump won the election, the market would probably fall 30 percent.
But that’s not what happened.
“Donald Trump wins the election and we get the Trump bump,” Kiely said. “The market was up 8.6 percent in nine weeks.”
Kiely pointed to an annual study by investment research firm Dalbar Associates, in which it looks at the habits of individual investors.
“The 2016 study showed that during the last 30 years, the S&P 500 stock index was up 10.35 percent per year including reinvested dividends,” Kiely said. “Yet the average individual investor earned only 3.66 percent.”
That means the average investor only earned 35 percent of what the market earned.
How can this be?
“Individual investors are constantly trying to outguess the markets,” Kiely said. “Most investment professionals will tell you this is an impossible feat. It can’t be done. But individuals constantly try.”
Kiely said investment advisor and writer Carl Richards gave this constant investor underperformance a name: the “Behavior Gap.”
“Individual investors are their own worst enemy,” Kiely said. “So to answer your question, if you want to invest internationally, then do so — we do. Just don’t start trying to figure out which countries to invest in and for what reasons.”
He means you shouldn’t try to time the market. Most investors who do that lose.
Email your questions to moc.p1508317351leHye1508317351noMJN1508317351@ksA1508317351.