February 2023
 

Markets don't remember. They move on. The stock market doesn't care about what happened last year or last week. It only cares about what happens today and in the future. So if you are starting out this 2023 with a hangover from all that happened in 2022, don't let it get you down. Start fresh!

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People and markets are always seeking best available deals, but they go about it very differently. People make decisions based on memory: they learn from experience, think back on past events, and worry about what tomorrow might bring. Markets don’t care about yesterday or the future. They only care about today. Because of that difference, the two can get into trouble when they try to understand each other.

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Markets are constantly seeking a price that balances the interests of buyers and sellers. This is what gives markets their power and efficiency, yet it’s also the source of their volatility. Markets must be forward-looking to set prices that entice buyers to buy. But prices can't be too low or sellers won’t sell. Every piece of available information feeds into the decision-making process so everyone involved can agree on the price for a particular security at a particular moment.

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As we make our way through the noise, markets work tirelessly to sort through the information and pricing changes of thousands of different company securities. That frees you from having to spend time doing that very important but time-consuming job.

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Investing has inherent risks. And no matter what anyone tells you, there are no guarantees. Control what you can control so you can set yourself up for success, and then give yourself some grace. Judge yourself by the quality of your decisions and not by their outcomes. There are so many factors outside your control that can impact investment returns.

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I believe one of the worst things investors can do is to impose their memory on their view of markets. Because then they might “see” patterns that aren’t there and make choices that aren’t based on research or evidence.

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We believe that key to successful investing is understanding how the markets work, and then using that knowledge to your advantage. The market is a great information processing machine, and it runs on human ingenuity - which means returns should grow over time.

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So start the new year off with a clean slate—just like markets do every day.