When Investing, Ignore The Experts’ Market Predictions

At the beginning of every year, financial firms and financial experts come out with their year-end targets for the major indices.  It’s an annual ritual that has gone on for decades. The experts’ predictions have been wildly wrong but that has not stopped them. Major financial publications and TV networks continue to give publicity to these worthless predictions.

To give you an example, in 2008, the median Wall Street forecast called for an 11% gain. Instead, the market fell by 38%.  If these experts couldn’t foresee the biggest recession in a generation, the chances are they won’t see the next one in a timely manner either.

Then, there are the perma-bulls who have bullish every day for decades, and the perma-bears that have been bearish for decades. These people often find pieces of data that align with their never-changing market view and publicize them. No one ever seems to hold them to account for their dismal record.

Markets have always been volatile.  There is nothing new in that regard. But attaching data and news to the volatility makes experts look like they know what they are talking about. But their record suggests otherwise.

Warren Buffet once said, “The stock market is a device for transferring money from the impatient to the patient”.  Can you be a disciplined investor and disregard the noise? Doing so can be immensely profitable to your portfolio.

What’s an investor to do to tune out all this noise and focus on what matters?

Focus on Buying Quality Companies 

Ignore the market fluctuations.  Market corrections are healthy and act as foundation for the next leg up.  Markets with no correction encourage bad behavior from market participants and is generally unhealthy.

Don’t Listen To Experts

Stick to your strategy.  While you should be informed about the economy and markets,  don’t become too fixated on the day-to-day movements of stocks, and economic indicators.  Don’t look at your portfolio every day.  Looking at it every quarter may be just fine. That way, you won’t take impulsive action based on short term movements in your portfolio.

Limit Changes To Your Portfolio

Make changes to your portfolio once a year unless there are life changes that necessitate more frequent changes.

Focus on asset allocation

Focus on asset allocation based on your risk tolerance, rather than on individual stocks in your portfolio.  Proper asset allocation may impact you more than the individual stocks or bonds you own.

Average performance is good enough

Everyone wants to beat the market. I have never understood the reason for that?  A hedge fund manager with decades of experience trail the market.  Even Warren Buffet goes through periods where he trails the market indices In wanting to beat the market, people take excessive risks and end up trailing the major indices.  Investing in low-cost mutual funds or ETFs, or a basket of good quality companies may be sufficient for most investors.

Bottom Line

Stick to your investing strategy at all times.  Don’t listen to the prognosticators.  They may sound very smart but their predictions won’t help you make a dime.







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