Let’s say your friend came back from the future and shared a glimpse of future market performance. He said that 3 months from now the stock market will be lower. He didn’t elaborate but hearing that the market would be lower got you concerned.

But then he said, “you don’t need to worry because 3 years from now the market will be up from its current level.” You now have two pieces of information pertaining to future market performance that no one else has. Even with this information, there is still a lot you don’t know.

You don’t know how far the market might go down or up. You don’t know what catalysts would cause the markets to go down and then up. And you don’t know how long each market move would last.

Your Plan of Response

Given this information, what would you do? Would you try time the market by actively selling and buying when you think it would best? Or would you choose to stay the course, as if you didn’t have this information?

This hypothetical example is typical in the markets because they are constantly fluctuating. And it demonstrates that even when you have some information, there is still a lot of information you don’t have. Investors often make unwise decisions when they believe the information they have is the only information that matters. Sometimes we just don’t know what we don’t know.

Our Two Cents

Remember, the market will always have unknowns that surpass the information we possess. Therefore, it’s essential to rely on a well-thought-out plan and expert advice rather than trying to make decisions based on incomplete or speculative information. While it may not always be easy, staying disciplined and avoiding knee-jerk reactions is the most responsible course of action in an unpredictable market.

If you’re considering working with us here at Mosaic, we invite you to learn more about who we serve and how we help them. You can also contact us with any questions you have.

By Marcus E. Ortega, ChFC, RFC | Investment Advisor Representative | CEO of Mosaic Financial Associates & Orthopaedist Advisory Group | Securities and advisory services offered through Cetera Advisors LLC, Member FINRA/SIPC, a broker/dealer and a Registered Investment Advisor.  Cetera is under separate ownership from any other named entity.

© The Behavioral Finance Network

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