February 2001

Where the Markets are
Going in the Next Year

© Talbot Stevens

Before each of my public seminars, I ask attendees what they are most interested in learning. This helps me connect with the audience, and also allows me to stay aware of the financial issues that Canadians are most concerned with.

To no one's surprise, saving taxes is one of the top goals, perhaps followed by the desire to retire rich … yesterday.

One interesting question that I regularly get asked was posed by Joe recently. “Where do you think the market is headed in the next year?”, he asked.

I smiled and replied frankly, “I don't know.” After seeing Joe's disappointment from learning that this financial “expert” didn't have an answer, I added “And no one else does either.”

After a few minutes, Joe recognized the value and significance of an answer that initially did not appear to be very helpful.

The fact is that no one knows what any stock market is going to do in the next year. I certainly don't pretend to know what is going to happen in the short term. The Minister of Finance doesn't know. Allan Greenspan doesn't know. Even the analysts who study the issues full time can't assure you that any prediction will take place.

The challenge and threat to a successful financial plan is that everyone is looking down at their feet trying not to trip on the issues of the day, instead of looking up and focusing on where they're trying to get to.

If I, like many financial commentators do, had predicted that the market would move up, down, or sideways, would that have had any bearing on what the market actually did in the future? Of course not.

If I had given a strong opinion that the stock market was going to drop by 40%, or go up by 40%, should that have changed Joe's financial strategy? I hope not.

The sooner we can accept the reality that no one can predict the short-term future, the sooner we can start designing and implementing a financial plan, and focus on the things that we know and can control.

There are certain universal truths or laws that always apply regardless of current conditions, that if acted upon, will definitely move you closer to financial freedom.

Define your goals. Create a written plan with the guidance of a professional advisor. Act on the plan, making adjustments along the way to stay on target. Take the time to learn some basic truths that withstand the test of time.

Everything else is speculation and noise, distracting us from where we're going, and what we need to do to get there. Those in the business of creating noise (the media), and those in the business of providing opinions on what will happen next would have you believe that what happens in the next week somehow affects your retirement plan decades away. It doesn't.

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