In this blog post, we’ll be exploring insights shared by Ken Fisher, Founder, and Executive Chairman of Fisher Investments, on the popular investing adage, “Don’t fight the Fed.” Through his extensive experience in the finance industry, he has debunked this widely held belief, and we’ll delve into the reasons why. Join us as we explore this interesting topic and the implications it has for investors.
Fisher Investments’ Ken Fisher Debunks ”Don’t Fight the Fed”
Introduction
When it comes to investing, there are a lot of popular myths and beliefs that have been circulating for decades. One of these beliefs is the idea that investors should never fight against the Federal Reserve, commonly referred to as “Don’t fight the Fed”. However, Ken Fisher, the founder and executive chairman of Fisher Investments, has recently debunked this widely held myth. In this article, we will explore Fisher’s views on the relationship between the Federal Reserve and the stock market.
Federal Reserve Rate Adjustments
The Federal Reserve is responsible for setting the country’s monetary policy, which includes adjusting interest rates. It is believed that changes in interest rates can have a significant impact on the stock market. However, Fisher Investments highlights that Federal Reserve rate adjustments tend to have a little long-term effect on capital markets.
Short-Term Volatility
While interest rate adjustments may not have a significant impact on the long-term performance of the stock market, they can cause short-term downward volatility. This is because investors may panic and sell their stocks in response to the news of a rate hike. However, Fisher Investments argues that investors who stay disciplined and stick to their long-term investment strategies are more likely to overcome this volatility.
Interest Rates and Lending
It is important to note that interest rate adjustments do not affect the amount of money available for lending. Instead, they only change the price of that money. In other words, higher interest rates do not equate to less money available for borrowing, but to a higher cost of borrowing.
History and Stock Prices
Ken Fisher recommends that investors avoid basing their investment decisions on interest rate predictions. This is because, as he points out, history shows that stock prices rise and fall despite the interest rate environment. Fisher Investments also notes that investors who try to time the market based on interest rate predictions risk missing out on profitable long-term returns.
Sticking to a Long-Term Investment Strategy
Fisher recommends staying disciplined to a long-term investment strategy, rather than trying to time the market or reacting to Federal Reserve actions. This means focusing on factors such as diversification, asset allocation, and risk management, rather than trying to predict the impact of interest rate adjustments on the stock market.
Investing Involves a Risk of Loss
It is essential to remember that investing in securities always involves a risk of loss, and past performance is not a guarantee of future returns. However, by focusing on a long-term investment strategy and avoiding popular myths such as “Don’t fight the Fed,” investors can increase their chances of success.
Conclusion
While it is undoubtedly essential to keep an eye on Federal Reserve interest rate adjustments, Fisher Investments’ Ken Fisher advises investors to avoid basing their investment strategies on these predictions. Instead, focusing on a long-term investment strategy, diversification, asset allocation, and risk management can help investors achieve profitable returns.
