Author Jim O’Shaughnessy is quick to point out that investors who inject their feelings, positive or negative, about Trump are making a mistake.
Jim O’Shaughnessy is ignoring President Donald Trump and thinks you should too.
But that’s not because he’s upset with the man now occupying the White House; it’s because he is an equal-opportunity investor, and he’s never paid much attention to the intersection of politics and personal money management.
The chairman and chief executive officer of O’Shaughnessy Asset Management in Stamford, Connecticut, O’Shaughnessy is remembered by a generation of investors who turned his book “What Works on Wall Street,” first published during the days of the internet bubble and updated in 2005 after the subsequent meltdown but before the financial crisis of 2008.
While his message today sounds political, it is anything but. In fact, he thinks that ignoring the actions of the president would be as good an idea for his supporters as well as his detractors.
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That way, Trump fans won’t be blinded by the market’s current run — the Dow Jones industrial average is up roughly 2,300 points, or 12.5 percent since Election Day — just as his detractors won’t miss out if it continues.
“I’ve been ignoring Washington for most of my career,” O’Shaughnessy said recently.
“What I am is very bullish on the United States of America and I will always be very bullish on the United States of America. [Warren] Buffett said it best when he said ‘You’re not going to get rich and you probably will go broke if you short the United States.’”
O’Shaughnessy is quick to point out that investors who inject their feelings, positive or negative, about Trump are making a mistake.
His super power is his patience and ability to screen out short-term noise to stick with what he believes in.
You should be working to make that your super power too.
“All that I rally against is people paying attention to short-term news and making emotional decisions based on a tweet they saw or something they saw on TV or something they read. In very short periods of time, it’s all noise; there is very little [market] signal,” O’Shaughnessy said.
One thing that isn’t changing based on headlines, emotions, politics or market conditions is the time horizon of every individual investor.
Focusing on that, rather than the big macro picture, is what O’Shaughnessy recommends for nervous times.
“If you want to be a great successful long-term investor, one of the things you have to do is align your decision-making with when you need your funds,” he said. “Easiest thing in the world to say, one of the hardest things in the world to get people to actually do.”
That’s because market cycles and corrections have not been repealed.
Most experts foresee trouble coming, but they won’t forecast when it will arrive, because those predictions usually prove futile.
O’Shaughnessy noted that he fully expects to see market corrections — and even a potential bear market move of 20 percent — in the coming years, but despite those setbacks “I think five to 10 years from now, stocks will be higher than they are today.”
“I don’t have any ability to forecast when and where these corrections or even a small bear market are going to happen, I can simply say ‘Yeah, you should probably anticipate it,’ ” he said, “but again, you want to align your thinking and decision-making over what is going to happen in the very long-term.”
So rather than look at Washington, D.C., and the markets with fear or greed in your eyes, look at your own portfolio and what you need your portfolio to deliver between now and retirement age, whether you expect to leave the workplace in the next few years or in several decades.
Give yourself a strategy that balances your needs with your ability to ride out problems.
The outcome in your portfolio, O’Shaughnessy said, “is more important than the whatever happens next in D.C.
Doesn’t make forecasts because they are bunk … much better off giving a monkey a coin and betting on whether it will land on heads or tails.
“Don’t judge things based on the man or what he might tweet; judge it on what gets passed and becomes new law,” he explained. “If we can get regulatory reform, if we can get comprehensive tax reform, and if we can get something going on with infrastructure, that would be a home run [for the market].
“You definitely want to try to — as best you can — avoid the emotions,” O’Shaughnessy said.
“The best thing investors can do: Find a strategy that’s going to work for you — if you are really conservative, it’ll be a very different strategy than someone who is aggressive — and then let it work.”