Has investing become a gamble?

Central Banks around the world rule the financial markets. Since the global financial crisis (GFC) of 2008/09, central banks have been in the forefront in steering the economies and injecting liquidity in the financial markets. This comes in the form of monetary policy that is either expansionary or contractionary.

Fund managers, financial institutions and investors watch the policy decisions of Central Banks. We are obsessed with when the Federal Reserve (Fed) is going to raise its benchmark interest rate and by how many basis points. The markets even provide you with the likelihood of raising interest rate in the next policy meeting. It has become a game of chance down to the percentage of probability.

In the last policy decision of Fed, the markets got it right. Fed did not raise the interest rate. The stock markets rose after that. The US dollar weakened against currencies.

If one is a gambler for immediate gains, would he bet with the majority punters or take the risk with the minority punters? Or like most investors, they just sit out and wait for the Fed’s decision to be released and then act. Assuming that Fed did increase interest rate in the recent meeting, what upheaval it would have caused to the financial markets. The minority risk takers would be laughing all the way to the banks.

It is terrible when investors are subjected to the decisions of the central banks and these policy decisions were coming in thick and thin since the GFC. Whether you like it or not, we have become “gamblers” unwittingly in this financial world, wishing that the central banks deliver what we expected or the other way round depending on what you “bet” on.

Copyright © 2016, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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