Only Fools Call Market Bottoms?

Every couple of weeks, there are writers, pundits, analysts, et al, declaring how the equities market has hit bottom, financials have hit bottom, real estate has hit bottom, etc, etc, this is followed by these assorted individuals being proven wrong when the asset class they’re discussing declines in value yet again. It’s happened so often over the past 18 months or so that I’m wondering why people are even listening to them anymore.

Look: a market bottom is a reverse looking indicator so you can’t so much call it as you can make note of it after the fact, as a result there is little point in calling one especially if you’re going to do it as if you’re 100% sure. The only way you can accurately call a market bottom is if you have time machine.

The only thing investors should be worried about is value, as in: “is this asset class undervalued with respect to its fundamentals and the outlook for the future?” If you’re buying undervalued assets then you don’t need to worry about whether or not the market has hit bottom, as you’ve invested in things that worth more than you paid for them. The same goes for purchasing a personal residence, as long as you purchase a home you can afford over the long-term, you have nothing to worry about.

Don’t get caught in whether or not a particular market has hit bottom, if you focus on affordability, sustainability and investing in under-valued assets you’ll have nothing to worry about.

Finally be sure to take note of the vested interests of those calling a market bottoms, i.e. be wary of shills purporting to offer objective analysis ; Lawrence Yun of the NAR, I’m looking at you.

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