“If I have noticed anything these 60 years, it is that people do not succeed in forecasting the stock market”– Benjamin Graham (Legendary Investor/Author/Professor)
Let’s face it…most of us love predictions. Perhaps it is our nature. We want to know what the “experts” think about who will win the big game or where the stock market is heading. Does our reliance on “trying to know what is unknowable” harm our likelihood of accomplishing what we want financially? Is acting on various predictions really the best path towards retirement?
As a financial advisor, I am often asked, “What is going to happen in the market”? Instead of saying we don’t rely on predictions, I usually ask how “being right” in the predictions might impact them personally. Most people can’t utter any response because they usually don’t connect these dots. They just have a cheerful belief in the “you too could be a winner” mentality.
In many ways we are deluded by the illusion that there is a magic system; a secret formula; a black box that can accurately predict markets today, tomorrow and well into the future. If this were so, most mutual funds, stock analysts and financial pundits would regularly beat the market. Unfortunately, most underperform.
Predictions are nothing more than bets like those placed in the casino. Skill and knowledge do not necessarily help with bets. The same is true for investing. Is it possible to win at Vegas or via predictions applied to investing? Sure, but the overwhelming weight of evidence says it is luck, plain and simple.
We stress goals focused investing using (instead of ignoring) the evidence. The objective is not to outlive your resources. Don’t confuse speculation with investing.