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Embrace Market Pricing

April 26, 2019by Brian Fry CFP®
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Riding the ups and downs of the stock market roller coaster can provide for a thrilling and stressful experience. As a Los Angeles fee-only financial planning firm, there are decisions clients face when developing an investment strategy. These decisions are based on removing emotion, lowering risk, capturing global market returns and tailoring investments to meet their financial plan. Over the next several weeks, I will share ten decisions investors face as they try to build long-term wealth in the capital markets.

1: Embrace Market Pricing

The market is an effective information-processing machine. Each day, the world equity markets process billions of dollars in trades between buyers and sellers—and the real-time information they bring helps set market prices.

This doesn’t mean that a price is always right—there’s no way to prove that. But investors can accept the market price as the best estimate of actual value.

If you don’t believe that market prices are good estimates—if you believe that the market has it wrong—you are pitting your beliefs and hunches against the collective knowledge of all market participants.

With each trade, buyers and sellers bring new information to the market, which helps set market prices. No one knows what the next bit of new information will be. The future is uncertain, but market prices will adjust accordingly.

Financial Planning Global Markets Austin TX
Exhibit 1: In US dollars. Source: Dimensional, using data from Bloomberg LP. Includes primary and secondary exchange trading volume globally for equities. ETFs and funds are excluded. Daily averages were computed by calculating the trading volume of each stock daily as the closing price multiplied by shares traded that day. All such trading volume is summed up and divided by 252 as an approximate number of annual trading days.

 

This is part one of a ten part series in pursuing a better investment experience.

Part Two: Outguessing the Market – Don’t Try It!
Part Three: Resist Chasing Past Performance
Part Four: Let Markets Work for You
Part Five: Consider the Drivers of Expected Returns
Part Six: Practice Smart Diversification
Part Seven: Marketing Timing – Avoid It!
Part Eight: Separate Emotions From Investing
Part Nine: Look Beyond Investment Headlines
Part Ten: Control Your Investment Focus

For More:

Learn more about investment management services

What is a fiduciary financial advisor?

Investopedia: Forces That Move Stock Prices

 

Los Angeles Financial Advisor

Still have questions in how to pursue a better financial planning and investment experience? Meet with a financial planning firm in Los Angeles or online.

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by Brian Fry CFP®

Safe Landing Financial is a Los Angeles, CA fee-only financial advisor providing financial planning, retirement planning and investment management to tech professionals and pre-retirees. When you work with Safe Landing Financial, you work with Brian Fry, a fiduciary and CERTIFIED FINANCIAL PLANNER™ that puts clients’ best interests first. Financial planning services include: retirement planning, charitable giving, asset protection, estate planning, saving for college, debt management, tax strategy and investment management. Safe Landing Financial serves as a virtual fee-only financial advisor to individuals and families nationwide.