For the Average Investor, The Next Bear Market Will Likely Be The Last
The comments below are an edited and abridged synopsis of an article by Lance Roberts
Americans who have financial advisors don’t trust them to act in their best interests. In a 2016 poll, 65% of respondents said they mistrust the financial services industry to some degree. In fact, only 2% of respondents claim to trust financial professionals a lot, while 15% say they trust them a little.
Most individuals desperately want to believe they are giving their life savings to someone they can trust, who knows more than they do, and will specifically look out for their best interests.
In other words, they want the impossible: All of the upside reward, but none of the downside risk. This demand for performance, which requires an exceptional amount of investment risk, forces advisors to cave to demands rather than do what is right by their client. The risk to the advisor is that if they don’t acquiesce to the client’s demands, the client goes to another advisor who promises them the impossible.
Since 2000, investors could have owned a portfolio of bonds and virtually had the same performance as owning stocks without the volatility, and Roberts outlines the core principles for this way of investing.
Markets are not cheap by any measure. If earnings growth continues to wane, economic growth slows, not to mention the effect of demographic trends, and the bull market thesis will collapse as expectations collide with reality. This is not a dire prediction of doom and gloom, nor is it a bearish forecast. It’s just a function of how the math works over time.
This time is not different. The only difference will be what triggers the next valuation reversion when it occurs. For most, the next bear market will be their last.