Systematic Relative Strength

The current list of things for investors to be concerned about include the fiscal cliff, European economic woes, and a Chinese slowdown. There will always be something. However, George Perry’s advice published at Real Clear Markets this morning seems to be solid:

So how worried should people be about the stock market? Nothing now on the horizon suggests that money invested in stocks today will look like a bad investment five years from now. But it would not be too surprising if stocks fell in this environment. Anyone who cannot afford a decline because they have a near term need for their capital should realize they are risking losses in stocks. They always are.

But now seems as good a time as any to be in the market for long term investors, like those who are saving for college or for retirement. Even such long term investors will be tempted, at times, to get out of the market temporarily. That is understandable but it risks reducing long term performance. As Warren Buffet has observed, nobody is likely to invest well based on what he reads in the paper each morning. And the economic risks discussed here have been, and will be, in the papers daily.

And what is most important: in order to time markets well once, you have to be right twice. First, knowing when to get out, and then knowing when to get back in.

This in no way negates the need for a well thought-out investment plan that seeks to manage risk, but I do think that it puts current risks in perspective.