The DC Today - Thursday, Feb 9 - https://bahnsen.co/40IKvQA

Ask Trevor

I can sympathize with the premise here – if earnings face some headwinds, and rising rates compress multiples, you want to know what drives stock prices higher from here. The real answer is I don’t know and this is the right answer because it is unknowable. Now, we could craft a reasonable narrative of what could happen, and how things might play out, but we’d never speculate on a hypothesis like this.

For me, I like to approach portfolio construction by categorizing each dollar into one of two categories – money earmarked to be spent in the near future and money set aside to grow over the long run. With this framing in mind, a conversation about swapping stocks for treasuries is an apples-and-oranges discussion. Stocks will irritate you in the short run, and yet history has shown a reward for the patient long-term investor, we call this a risk premium.

Portfolio design made simple is all about matching the appropriate investment based on a well-defined time horizon. If you ever find yourself trying to invest long-term monies in short-term solutions or vice versa, you are participating in some version of market timing.

Based on my own experience, I know I can’t time the markets in a consistent or profitable manner. I also know I have never really met anyone who can. So, if it walks like market timing, talks like market timing, it’s probably market timing, and you can’t count me out.

Links mentioned in this episode: