It seems like every day an investor will ask me about my prediction for the stock market. Well anyone who works with me knows I do not believe anyone can predict the future movement of stocks with any consistency.
I believe no one can tell you whether the next 20% move will be up or down. But the next 100% will be up.
Each day the media focuses on a new prediction. Their audience is continually searching for new predictions. What will happen next? What is the new hot asset class? Where is the best place to put my money?
This is why people continue to watch the talking heads on the business channels. And why shows like Jim Cramer are so popular.
Everyone wants to have the best investments, only making money and avoiding all losses. This futile exercise will only add anxiety to your life.
To repeat…..No one can consistently predict the future.
When someone is right on a prediction it is a matter of luck and not skill or knowledge. Free markets are random and unpredictable.
Free markets left to their own devices set prices better than any individual or committee. They incorporate all of the knowable and predictable information in the present, as well as knowable information about the future.
Only unknowable future news and information can change prices going forward.
Rather than attempting to predict the future use your time and resources to improve your skills, either career or life.
Your investments are best allocated by owning equities, globally diversify and rebalance.
Follow these three simple rules and you will succeed in reaching your long term goals.
The problem really is when a stock picker or broker gets hot. People pour money into them to join the ‘party’. Problem really arises when the hot picker or broker cools off and lose money.
As an example Bill and Hillary Clinton’s son-in-law started a hedge fund less than 2 years ago and has since closed it. Why? Because the fund lost 90%. Hot then Not.
I call this musical brokers.
If you are serious about making your money last and grow with a certain degree of consistency. You need to fire your broker/agent and hire an investor coach/fiduciary advisor.
Your fiduciary advisor will help find the level of risk you are comfortable with and that helps reach your goals.
Your portfolio will be globally diversified. In my case the portfolios also have a small cap and value cap tilt. Regardless of this, a globally diversified portfolio will underperform at times.
This is where many investors stray off course. They then believe the globally diversified portfolio is no longer working. Or some broker shows them an outperforming strategy.
There is no strategy that will always outperform. But switching from one strategy to another will lead to poor results in the long term.
To remain disciplined during underperforming periods work with an investor coach/fiduciary advisor.
Process, consistency and discipline work. Free Markets Work.