Investing Truth No. 1: Good investing really starts the day you are born

By Mike Jones, posted August 15th, 2013

Most people think of investing as a personal activity that directly impacts their individual future.  However, most of what we are taught is really only applicable to investors en masse, i.e. the market-at-large, and over large periods of time.  Over the next several months I will share 10 points that I believe every investor should know prior to committing funds to any investment program.

Everyone's experience with investing will be unique. And, for better or worse, how well you do with your investments will be largely determined by your birthday.

This chart helps explain what I mean.

This chart illustrates the tendency of markets to move in long-term (or "secular") directions. These secular cycles may run 20 years or more. Secular bull (upward trending) markets are shaded in blue, and secular bear (downward trending) markets are in red.

It's important to understand the difference between short-term and long-term cycles.  Oftentimes analysts, brokers and advisors will use terminology for short- and long-term trends interchangeably.  

The problem this creates is that while it's very good and interesting to know the long-term, historical returns of the market, most people are only active players in the stock market for 20 to 30 years, which is precisely the reason why "successful" investing is so dependent on when you begin investing.  

So, looking back at the chart, we can easily see why someone who began investing in 1930 would have had a much different experience from the person who began in 1980.  

It is for this reason that knowledge of secular cycles could be of great assistance in helping you reach your financial goals.

It's easy to look backwards in history at any given day and determine whether a particular period was a bear or bull market cycle. The not-so-good news is that it is not so easy to tell where we are now in any given cycle, much less how much longer the present long-term cycle is going to last.

Can you invest during in a long-term, secular bear market cycle and expect to make money?  

As shown in the chart, there are oftentimes short-term bull markets occurring within secular bear markets.  Those are windows of opportunity.

I believe the goal of wise money management during secular bear markets should be to identify and make the most of the shorter business cycles and securities patterns occurring within the secular cycle.

Mike Jones is Managing Director / Investing Group of Argent Advisors, Inc. Email him at mjones@argentmoney.com. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5844. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc.  No forecasts can be guaranteed.  Argent Advisors, Inc. does not offer tax, insurance or legal advice.  The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.