I have been reading the four pillars of investing and the author makes an interesting point about markets. He argues that when things seem darkest for stocks, that is the time to buy because peoples concerns of the future are making them overly bearish despite stocks being on sale. Alternatively he argues that when the sky seems clearest is the time when stocks are the most expensive and the least likely to offer a generous long term return. With the exception of a few markets like Japans this principle seems to hold up, and to be backed up by the data. That is to say that investors who buy stocks when the markets look to be at their worst get a much better long term return than those who buy when things look best. Further he goes on to say that for long term investors still in the accumulation phase a market crash is good news because it is a change to buy stocks on sale, while a extended bull market during the accumulation phase can be harmful to long term returns by driving up the costs of stocks. This seems intuitive to me and it makes sense that, on average, investing into bear markets nets a higher return than investing into bulls. The problem is then that this information in relatively useless for a buy and hold investor who doesn't intend jump in and out of the market and can only hope for optimally timed crashes to boost returns. My thought then is why not look abroad to foreign markets that have crashed hard, and thus will likely net a higher long term return than market that is currently bullish. Admittedly globalization will have intertwined many of the large stock markets, but I imagine there must still exist isolated market crashes in foreign states that one could invest in and ultimately net a higher return. What am I missing here?
Submitted November 07, 2017 at 05:54AM by rustinchole http://ift.tt/2yDsc6c
