How Will Investors Behave in 2023?

Although many people do it, making forecasts about how financial markets will fare in 2023 is an entirely pointless endeavour. What we can predict with some confidence, however, is how investors will behave – that doesn’t change much. So, what will we all be doing in 2023?

– We will spend a lot of time dealing with an event that hasn’t yet occurred and which will not matter to our long-term returns.

– We will make changes to our portfolios based on what happened in 2022. Not because it makes sense from an investment perspective, but so we can avoid having painful conversations about underperforming funds and assets.  

– We will speculate that an asset class or investment strategy is dead and no longer works.

– We will forget that we once said an asset class or strategy was dead after it makes a dramatic resurgence.

– We will become an ‘expert’ on an issue that we don’t currently know anything about.

– We will view what occurs in 2023 as inevitable, after it has happened.

– We will wonder what an underperforming fund manager is “doing about” their poor returns.

– We (alongside 7,534 other people) will spend a lot of time writing meaningless, short-term market commentary that few people will read, nobody will remember and pray that ChatGPT will soon come to our rescue.

– We will check markets and our portfolios far too much.

– We will have even less time to think than we anticipate.   

– We will tell somebody that the free time in our diary wasn’t an available slot for a meeting, but actually an opportunity to do some work.

– We will talk in certainties, not probabilities.

– We will speak confidently about short-term market performance as if it isn’t just random noise.

– We will extrapolate whatever happens in 2023 long into the future.

– We will not spend any time on how to improve our behaviour or think long-term, even though it always seems like such a good idea.

We know that these behaviours are damaging, but it is difficult to stop them. It is in our interests to play the game. It is more lucrative and less personally risky to be part of the problem. We either feed the monster or get eaten by it.

What should investors be doing? Thinking, reading, walking, ignoring and trying to appreciate how much of the behaviour that is expected of us is of detriment to our long-term results.

If nothing else, we should all spend 2023 trying to give off a little less heat and a little more light.

My first book has just been published! The Intelligent Fund Investor explores the beliefs and behaviours that lead investors astray, and shows how we can make better decisions. You can order a copy here.