USA Today recently published an interesting article titled “How bad are Wall Street forecasts? Really bad.” The article reviews why you are probably better off ignoring financial advisors who try to predict the market. Not only is their combined track record horrible over time, you may get better results by simply tossing a coin – heads the market goes up, tails it goes down.
According to the article, one key reason investors follow market strategists is the false belief that finance is similar to a science like basic physics, which is highly measurable and predictable. In reality, trying to predict the market is more like sociology, which in sharp contrast to basic physics, is highly influenced by unpredictable emotions such as fear and greed.
Based on my over 20 years of experience managing investment portfolios, I was fortunate to learn early on that the best approach is to focus on fundamentals such as “Is this a good business?” rather than following the advice of anyone with the title “Chief Market Strategist”. Because these forecasters are really there to sell their company’s financial services, I believe a more accurate job description would be “Chief Marketing Strategist.”
Click here to read the article.