Best performing stock markets in 2023, and the one ETF financial advisors are buying now.

Financial advisors the last 14 months: Buy stocks! Buy stocks! Buy stocks!

People: Meh…

Media: Releases one article showing the US market is up 20% since December.

People: OMG I NEED TO BUY STOCKS NOW!!!!

Seriously?

We've been telling you this for over a year. Historically the US stock market had a 91% probability of going up over the next 4 years. So why did people wait to get in?

We’re now in a situation with two different types of people:

Person 1: OMG, the market is going up, I must buy NOW.

Person 2: Oh no, I’ve missed the bottom. I guess I’ll have to wait for the next crash.

Who’s wrong?

Both of them.

They’re both attempting to time the stock market. They refuse to “catch a falling knife” and are waiting “for the next bull run”.

It’s a terrible strategy.

Most hedge fund managers can’t time the market, because markets are irrational over the short-term.

So what makes you think that you, an average joe with no qualification in the field, can outperform a career investment manager?

No, it can’t be arrogance.

You can’t be that narcissistic.

Right?

Unfortunately, most people are. When asked 87% of US drivers rated themselves as “above average drivers”. 93% of MBA students rate themselves “above average”. And 84% of Frenchmen branded themselves as “above average lovers”.

Humans are over-confident by nature. We’re terrible at taking an honest look at ourselves.

But humility is possibly the most important trait to have in investing.

When confronted with new data, you MUST change your opinion of the stock market.

In investing, your feelings don’t matter. Your views of the world are irrelevant. And your economic forecasts are useless. The only thing that matter is facts and data.

Trusting anything else is a recipe for disaster.

So how does one proceed in this scenario?

It’s simple.

We make educated guesses, based on historical statistics and probabilities.

This is evidence-based investing.

It doesn’t mean it will always work out.

But it works most of the time.

Here’s what this means for today: I know you’re feeling down because you missed the market bottom. I know it can be tempting to wait it out a bit longer until the “next crash”.

But that feeling isn’t supported by data.

This feeling is probably stirred by your desire not to feel stupid by refusing to invest the last few months.

It’s a powerful motivator.

But it is driven by your feelings.

As an evidence-based investor, you must follow the data. Here’s what the data tells us:

1. The stock market goes up over time (91% probability that it will be higher in 4 years);
2. ?The stock market outperforms other asset classes (80% probability that it will outperform US treasury bills (govt bonds) over the next 10 years);

Betting against this is a fool’s errand. It is statistically improbable. You’re literally betting against the odds. That’s a tough bet to make.

Still feel confident it’s possible to time the market? Here’s another statistic for you:

66% of the time the market went down, by at least 10%, did not happen during or just before a recession.

This means it isn’t possible to forecast a drop because of a recession or fear of a recession. Once again, the odds are against you.

If these three statistics together are still not enough to change your mind. Or if you really feel horrible of buying into the stock market after it has gone up, I have good news for you:

You don’t have to buy the market that just went up.

Yes, sure, the US stock market is up 20% since December. And here are the best performing stock markets in 2023:

Japan is up +23%.

Mexico +24%.

Korea +18%

Germany +15%

France +11%

Europe +8%

Canada +5%

But it doesn’t mean everything is up.

You don't have to buy after a market went up. You can buy into the markets that haven’t seen such a massive jump. Since the start of the year, and in currency-adjusted terms, here are the stock markets with the worst performance in 2023:

India is up only 1%.

China is down -6%.

And Turkey is at -19%.

There’s still discounts available, if you have the courage to buy into emerging markets.

And if you’re not a fan of these countries, and insist on investing in the US, look at a different market segment.

US small cap value stocks, which has outperformed the US stock market over the long term, is up just 5% since the start of the year.

Compare that to the S&P 500, also known as “the market”, which is up about 20%.

So if you’re still on the fence about investing, you can find comfort in the knowledge that you haven’t missed the take-off of this asset class yet.

Better yet, this is also what most financial advisors are buying.

Don’t wait too long though, these “lags” don’t tend to last long. Market returns tend to converge over time.

If you want to look up an ETF that tracks US small cap value stocks, type in the ticker “ USSC ” into your brokerage account.

This isn’t an investment recommendation. This asset class has its peculiarities that make it harder for most people to hold on to it. Make sure you educate yourself properly beforehand.

I’ll leave you with this beautiful quote on investing:

“The best time to invest was 20 years ago. The second best time is now.”

Follow me if you learned something from this article!

#stockmarket #investing #financialfreedom