It seems every other day some 'expert' is calling for the Australian share market or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) to crash.
Back in 2015 and 2016, Chinese markets were hitting rock bottom then bouncing back then hitting rock bottom again. Investors were fleeing the market.
Last year, investment bank RBS told investors to sell everything. It may have had some investors concerned at the time. But it's only now that we can look back and say that it was folly.
Investment bank Citi recently published a report showing that it has been six years since the last major correction, a winning streak second only to the 91' to 98' bull market.
"On that basis alone, many argue a downturn is overdue," the ABC wrote this week.
Maybe.
Maybe not.
When I was studying financial theory at university we analysed all kinds of patterns that are said to play out in the share market.
Some people believe share markets move in Fibonacci sequences, like waves, or in sync with US presidential elections. I think it is all nonsense.
A Correction in Your Head
Once you remove the fear or ego that comes with trying to predict the direction of the share market in the short term — one to three years — investing becomes a whole lot easier.
Want proof?
Find the share price chart of the best-performing company over many years — or the ASX 200 — zoom the chart into one year of historical prices. Then, slide/move the chart backwards in time, keeping it locked on one year's worth of prices.
I do not need to know the company — or the index — but I will guess that the chart zigzags up and down — despite it being a great performer.
Why?
Because financial markets are random and unpredictable in the short term.
But, if you zoom the chart out to more than 10 years of prices it will look like a hockey stick on its side.
That is, it will have a great growth trajectory even though the short-term prices looked completely random and volatile.
Foolish Takeaway
Market crashes and corrections will come and go. I believe that so long as you have money put aside for a few months of living expenses, invest in a sensible basket of shares and hold for the long-term, your chances of investing successfully will improve significantly.
