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?
- When will the next crash occur?
Everyone wants to have the best investments, only making money and avoiding all losses. This futile exercise will only add anxiety to your life and reduce your long term results. 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 unpredictable.
The famous black swan theory of Nassim Taleb notes that in the European mind swans were known to be white—-until a single black swan was discovered in late 18th century Australia. From that moment, it was no longer possible to predict the probability of seeing a black or white swan, absent relevant data.
That metaphor led to Taleb’s view that world wars, pandemics and disruptive technologies are all black swans that are unpredictable except in hindsight for lack of historical precedent.
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 and high quality short term fixed income.
- Globally Diversify.
- Rebalance.
Follow these three simple rules and you will succeed in reaching your long term financial goals.
You will add to your anxiety and reduce your long term results if you invest using the following:
- Stock picking…that means picking the stocks you believe will outperform..(hint it doesn’t work long term)
- Market timing….you have be right twice getting out and then back in…(hint this is also a taxable event).
- Track record investing…there is a reason this statement must be made …past performance is no indication of future results…(hint when a stock picker gets it right it is a matter of luck and not skill).
These are clear signs that you are gambling and speculating with your investment dollars.
Stop empowering the Wall Street bullies, fire your broker/agent and hire an investor coach/fiduciary adviser.
