We are welcoming in a new year, and everyone is forecasting what lies ahead. As we all know, a forecast is just a prediction of what we think will happen in the future. Unfortunately, nobody has a crystal ball to help us with our investment decisions. The future is not set in stone. Market returns for a whole year might come from being invested only a handful of days. So, how does one know when and when not to be invested? How can one time the market and get it right every time?
Sadly, no one can. The best course of action is to diversify your investments across quality companies that make up different areas of the economy. Some areas will do better at times than others, but over the long run as the economy grows so will the investments made in it. Trying to guess what might happen over the next six months is not unlike trying to forecast the weather; sometimes you will get it right, and sometimes you will get it wrong. The same goes for forecasting the stock market. Trust in quality investments, and protect a portion of your investments into quality fixed income instruments to protect your savings.
The real point to all of this is not to put too much faith in thinking about what might happen. Be aware of potential pitfalls, prepare for them with diversification, and rely on the quality of your investment portfolio to bring you through to the finish line.