Personal Wealth Management / Economics

Fisher Investments’ Founder, Ken Fisher, Debunks: Well-Rested Investors Are Better Investors

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher debunks the common myth that investors should invest in volatile assets only to their point of comfort. As he wrote in his book Debunkery, this can lead some investors to place too much of their portfolio in “safer” assets—likely limiting growth opportunities and jeopardizing their long-term goals in the process.

Ken says most investors have a longer time horizon than they might expect and, therefore, may require higher returns to maintain their standard of living throughout retirement. While equities have a greater tendency toward volatility in the short-term, Ken says the long-term growth potential of an equity-heavy portfolio could lower the risk of an investor running out of money in retirement. Short-term market declines are emotionally harrowing for investors of all ages, but Ken suggests taking a deep breath and tuning out the buzz to avoid emotional investing decisions that might harm your long-term financial objectives.

Transcript

Visual

A Man appears on the screen wearing a navy suit, sitting on a chair, behind him is a white screen with the title “Debunkery” 

He begins to speak.

Audio

Ken Fisher: You end up often buying high when things look good and cozy, and then selling low later when things get scarier. It's a classic remedy for buy-high, sell-low because you do not know how you will feel really after the market drops another 30%.

Visual

On the white screen a title appears “DEBUNKERY” with subtitle “Seeing Through Wall Street’s Money-Killing Myths”

Ken Fisher Appears Back again in the same position.

ken fisher doing hand gestures time to time explaining.

Audio

Ken Fisher: When I was young, a long time ago in a world far, far away, there was a general notion that was promoted in the financial world, which is that you should sell down to the sleeping level. What did that mean? It meant that you shouldn't own more than you're comfortable with. And it's easy to see why that's

commonsensical. But it isn't necessarily right because markets are a little bit scary.

Visual

 On the screen behind Fisher, an index appears to show us where people buy and sell.

Audio

Ken Fisher: The fact is, the scary part comes and goes. And you might be comfortable at one moment in time with things that you're not comfortable with at all months later. And if you follow that process of sell down to the sleeping comfortable level, you end up often buying high when things look good and cozy, and then selling low later when things get scarier.

It's a classic remedy for buy-high, sell-low, because you do not know how you will feel really after the market drops another 30%. In which case, if you do know how you'll feel after the market drops 30%, you don't need to be watching this video.

This coming from my book, Debunkery was bunk number two, arguing that you don't need to think that way.

Visual

On screen a grandfather clock appears, it appears to be going of every hour according to Fisher.

Audio

Ken Fisher: If you have trouble sleeping, I encourage you to buy a mini grandfather clock. Now, I got one years ago. And if you've ever had one, you know that every half hour it goes off, and then every hour it goes off one chime for every hour—one at one o’clock, two at two o’clock, on and on until you get twelve of them.

And if you've never had one when

you get one, you can't sleep. You couldn't sleep if you had to because they go bong, bong, bong, bong, bong! Drives you crazy.

After you've had it for a little while, you know what happens? You don't even hear it go. You don't even notice that it's happening. People will hear it in your home when they're visiting and ask you about it, and you'll, oh yeah, right, you get used to it.

My point is, volatility is much the same way. The reality is, this is usually used as an argument that you should sell down to the sleeping point, to have you have a portfolio with a fairly heavy fixed income or other totally secure component to it, so that the volatility of equities doesn't drive you nuts.

Visual

An average life expectancy table appears. Behind Ken Fisher.

Audio

Ken Fisher: The reality is that for most of you, not all of you, most of you have a much longer time period that you need your assets to last for you than you think you do. And therefore most of you, unless you're very rich or you don't have long to live, which is some of you, most of you, whether you're 35 or 65, with a longer time horizon than you think you have, the last thing you want to do is run out of money when you're old.

Visual

On the screen behind Fisher, a chart appears, this chart is showing long-Term Performance of assets: Annualized Returns Of multiple assets and shares.

Audio

Ken Fisher: The fact is, this speaks toward having a higher equity allocation until you're very old and have that shorter time horizon. Because in longer time periods, equities routinely do better than the alternatives. Or, only a little worse, as I've said before, in other times, in other places, and as I said in my book Debunkery with a lot of data and detail.

The fact is, what you need to learn to do is, just like with the grandfather clock, after a while you're focusing on other things you don't even hear it. Once you get yourself to focus on the long term, the short-term volatility gets after three or four cycles, like, you don't really tune into it that much the way you did to your grandfather clock when you first got it.

Visual

On the screen a new chart appears, this time the chart is showing us S&P 500 Bull and Bear Markets Since 1946, Size and Duration over the years.

Audio

Ken Fisher: So, my advice, get a grandfather clock, learn the lesson, and from there focus on the long term, your long-term needs, and don't focus on the myopic short term. Try to extrapolate it into something that causes you to take action, to become more comfortable. The fact is, after a number of cycles you'll get more comfortable anyway, just like with the grandfather clock. And in that, learn to focus on the long term, stay away from the short term.

Don't try to sell down to the comfort level because you'll buy high when everything's comfortable and cozy looking and sell low and really hurt yourself.

Thank you very much for listening to me.

Visual

A half white half red screen appears.

Audio

Ken Fisher: I very much hope you enjoyed this video as part of my series on Debunking Common Market Myths. To watch more videos like this, click the link on the screen and make sure to subscribe to Fisher Investments YouTube channel.

Thanks so much for listening to me.

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