How long should I lock my mortgage for?
Do you think I should buy shares now or later?
I think this company is going to the moon. What do you think?
These are some of the questions I frequently see and hear.
The problem with asking the question is that the answer is already available to you.
Todays prices and interest rates are the result of the consensus opinion as to where things are heading in the future. The predicted future events are reflected in todays prices and interest rates.
Whether the consensus predictions eventuate or not is another matter. If prices or interest rates change it is because something happened that wasn’t expected.
A common example of this in practice is I hear people harp on about retirement village shares being good investments because the population is ageing. But you are not a special unicorn that knows something no one else knows. The majority of people know the same thing. What people are willing to pay for the share today is based on their future expectations. Hence, peoples best guess as to what will happen in the future is reflected in todays prices.
When people ask these “what do you think will happen questions”, what they are essentially asking is do you think something different will happen than what most people currently believe? And of course if less than half of people think something is going to happen that is not the commonly held view. You would have to be an outsider to pick on something else and are you willing to put your money where your thoughts are?
With most areas in finances I like to spread the risk. Minimise the likelihood of making an all or nothing type of decision.
I consider the future interest rates as unknown so I spread my mortgage across multiple terms.
I consider it unlikely to pick one or two top performing companies so I pick them all.
Just a short one today to hopefully reduce the “what do you think will happen” questions. Until any new information comes to light, what everyone thinks is already reflected in todays prices and interest rates.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here