Predictions, What Are They Good For?

Posted on November 9, 2020 by Tony — No Comments ↓

Well the election appears to be over. However there appears to be a court battle looming. For those of you who remember the 2000 election, Al Gore fought the results for 37 days and that was for one state, Florida. Remember the hanging shard.

In the end George Bush was inaugurated, I really expect the same result.

In the meantime, today it was announced that there was been very promising result in the Pfizer in a 90% effective coronavirus vaccine. The equity markets have reacted extremely positively. This is probably overdone, but I’ll take it.

I recall many predictions, depending on the election results. I wonder how many got this one right. I doubt there were many. I had many clients asking to get out of the market until things ‘settle down”.

As many of you know I do not believe in market timing. In that an investor can get out of the market at the right time AND get back in at the right time.

This has been proven to result in poor outcomes.

I also do not believe in stock picking or track record investing. There are examples of good stock pickers, Peter Lynch of Fidelity Magellan Fund averaged 29% per year for 13 years. Even with this stellar performance, Mr Lynch state3d he believed most investors of hos fund lost money.

Why? Because they bought at a high and then sold during the inevitable down turns.

There are of course, other examples of successful stock picking. But the average investor will not beat the market over the long term.

Which leads me to track record investing. This is using past performance to predict future results. NOT! Is possible? Yes. But not very likely. There is very little evidence that past performance predicts future results. This is why there is a disclaimer on all financial literature. Past performance is no indication of future results.

To receive the best long term results you should