Is a market crash coming?
Anyone who's been around markets for a while will have heard the adage that "it's not timing the market, but time in the market, implying that market timing is difficult or impossible to get right. Marcus Padley from Marcus Today disagrees.
"I would say anyone who suggests you can't time the market is copping out because if you can't time the market, what are we all doing here?"
That doesn't mean staying in cash most of the time and hoping - in fact, Padley says they're fully invested most of the time. You don't even need to try to predict what's coming. Instead, it's about being alert, and reacting when conditions change.
In the video and transcript below, Padley addresses one of the most common questions he hears from investors: Is the market about to crash?
Anyone who says you can't time the market is just marketing to you. If I had a financial advisor who was telling me, "You can't time the market," I would start looking for another financial advisor. Once, I was at a broking house and the market was collapsing during the GFC and I had written, "Anyone who says you can't time the market is a bloody idiot."
And the next Monday, the top trader on the floor came smashing down the corridor in an open plan office with 200 people going, "What did you write on Saturday?" He had sent an email out to all his clients on the Friday before saying, "Don't worry, you can't time the market. It's all long term."
I would say anyone who suggests you can't time the market is copping out because if you can't time the market, what are we all doing here?
The days of Warren Buffet-esque investment, where you read the Intelligent Investor and buy a stock forever are, I'm afraid, gone. Yes, you can do that, but the demands now, especially for fund managers in a very competitive industry, is to be more active than that.
So I would say you do have to time the market, we do attempt to time the market. Our process for that is we have an investment committee meeting every morning, and top of the agenda is our cash versus equities discussion. Most of the time we are fully invested and that's our job. We're supposed to invest.
Occasionally, you get these precipitous moments and as a team, we will make a decision when they are, which is how we did the pandemic. I remember one of my colleagues just saying, "Go for it," because we had to. You have to make these decisions precipitously, not knowing the future. They're hard to make. You have to be decisive and usually a committee isn't decisive, but we were decisive.
We've trained ourselves to spot these moments. We hope to do it again. It's the only time we can massively outperform is when we are in cash when the market's collapsing. We look forward to the next one. Let's just hope we get it right again.
Do you think there is a market crash coming?
You don't have to worry about it and that is something that I think everyone needs to learn at the private investor level: Stop worrying about the market falling over because nobody knew, not the Kings and Queens, central bankers, bankers, brokers, financial planners, taxi drivers, no one knew the GFC was going to happen before it happened there. Aside from a couple of people in the Big Short who thought they knew and did, but people don't know what the future is going to be and you couldn’t have known in advance that the market was going to drop 30% odd in 25 days in 2020. You just can't know.
My advice is to relax and work on your golf handicap. Until you see the stock market on the front page of the tabloid newspapers, you know everything is fine.
And when it does appear, react. That's the skillful bit. It is being assertive and decisive enough to believe that investment isn't forever. It's not about buying stocks and holding them for 10 years. It's about making money on any timeframe you can and that involves, at some point in the market, being decisive, and many people aren't decisive.
Stop fearing a crash, wait for it, don't predict it, react to it. Read the Marcus Today newsletters. It's all we're writing about half the time. Our cash versus equities decision at the time, our strategy. And you can make your own mind up, but you don't need to fear it whilst it's not happening. At the moment, we've got a very nice, comfortable bull market. When you wake up to find Wall Street down 5%, have a think about it.
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