Prior to the Sunday night NFL game between San Francisco 49ers and the Philadelphia Eagles the ‘experts’ gave their predictions on the outcome. Keep in mind both teams have significant injuries to key players.
Every ‘expert’ picked San Francisco to win. Each had their own reasons, strong team, last week’s performance, this player is better, that player is not playing well…….
Well guess what? Philadelphia won.
This proves that predicting the future is really, really hard. Each week the ‘experts’ make predictions and sometimes they get it right.
This is much like the investment field. There are predictors and forecasters, some get it right and some wrong.
The real problem is when one of these ‘forecaster’ is right, which is statistically inevitable. These predictors will market this fact extensively. What investors don’t seem to realize is that there is no correlation between past performance and future results. Like I said some of these forecasters will be right but there is no reliable way to know which one(s) will be right going forward.
Dr. Eugene Fama of the University of Chicago won the Nobel Prize in Economics in 2013
for his work on efficient markets. Dr. Fama essentially proved that all knowable information is already in the price of the security. There is no reliable way to predict how the markets will perform going forward.
Throughout my career in financial services I have also continued to search for the ‘answer’ with some success followed by poor results. I finally remembered by finance courses in both college and graduate school. In my studies I learned that there is an academic and scientific method to investing that has proven to be successful in the long term. The issue is that these methods do not eliminate risk but rather work to control it.
Investors would be more successful with less anxiety if they worked with an investor coach. An investor coach will teach you among other things where returns really come from. HINT: it does not come from the hot stock picker or market timer or the manager with the best track record.
Trying to adjust your strategy based on current conditions will result in poor and disappointing results.
When you have a prudent process and the discipline which an investor coach will provide, success will be yours WITHOUT the need for an accurate forecast.