It seems all investors are worrying about something these days. The Fed rate hike, Greece, the strong U.S. dollar, China’s slowdown. The list goes on.
Billionaire investor Ken Fisher says ignore it all. If you’re picking stocks, disregard the media and market chatter. All those broadly known fears are already priced into the stock markets. Your time is far better spent thinking about what’s next.
“The market prices what everyone worries about. They’re doing it for you as a free service,” says Ken Fisher, CEO of Fisher Investments, a money management firm in Portland, Oregon. “Let me worry about something else — that’s where the worry should be applied.”
General Motors = Greece: Fisher, a self-described “old goat” from Portland, Oregon, details his strategy in his latest book, “Beat the Crowd: How You Can Out-Invest the Herd by thinking Differently.” For example, many investors are concerned about Greece defaulting, leaving the Euro zone or both.
Fisher says Greece’s economy is about the same size in production as General Motors. The markets didn’t crash when GM filed for bankruptcy in June 2009. Stocks actually recovered for the rest of the year.
“When General Motors went bankrupt, did the market go through the floor? No. the market blinked,” argues Fisher, a Forbes columnist. “Greece would have about the same impact.”
In fact, a regional crisis — either economic or geopolitical (think Ukraine) — don’t affect markets much, Fisher says. Only world wars have shaken the markets in his view.
Fisher recommends that investors look for events that are three to 30 months in the future, but not being widely talked about.
A ‘constitutional crisis’: Consider this example: The Supreme Court is going to rule on the legality of the Affordable Care Act this year (again). That will likely come in June.
Here’s how Fisher thinks about it: What if the Supreme Court were to rule the ACA illegal and then President Obama issued an executive order putting it back in place? Obama countering the Supreme Court would cause a “constitutional crisis,” Fisher says. Markets would be filled with uncertainty. That’s the scenario an investor should worry about.
“A constitutional crisis that’s now just a few months away — nobody has that priced in,” says Fisher. “Markets hate uncertainty.”
All the potential uncertainty could spook new investors. Millennials are already reluctant to invest their money, according to multiple surveys. But Fisher doesn’t see that many differences between Millennials and the Baby Boomer generation.
The next generation: “The Millennial group is more normal than most people think it is,” says Fisher. “My generation was terrible.”
Many Baby Boomers didn’t have money at a young age and were timid about investing or had no financial direction, he says.
“Eventually, all those things changed. And I think same thing will happen to [Millennials],” says Fisher.
The billionaire’s advice to investing newbies: Read old-school investing books or go for passive, low-risk index funds. The only reasons not to be passive is if you know something that everyone else in the markets does not.
