The Graveyards are Full of Investment Gurus.

January of each year is the time for new predictions by the gurus of the past. Some made masterful trades, such as, exiting the market prior to the 2008 market crash. The investing public eagerly awaits their ‘wisdom’ on the market direction and what asset classes to invest their money. It could be stocks or real estate or gold or cash etc.

The Wall Street Journal
The Wall Street Journal (Photo credit: Wikipedia)

What the public does not realize is that these past trades/recommendation were a matter of LUCK and not skill.

The most notorious of these gurus includes Bernie Madoff. At one time Madoff was the money manager to the wealthiest and most sophisticated investors in the world. One investor said that “if you were not invested with Bernie Madoff you were a loser”. This trading scheme like many which relied on an accurate prediction of the future eventually failed. Madoff was only able to stay on top due to fraud.

If the investment strategy your broker recommends relies on an accurate prediction of the future you are speculating with your money.

The media loves to promote the wisdom and insights of managers with “hot hands” or the “Midas Touch”. They gleefully put them in advertisements and on magazine covers. These gurus are often featured one of two years later in derogatory articles about how their investing prowess has mysteriously disappeared. They die in the pages of the Wall Street Journal or Money Magazine.

Stock pickers and market timers, getting in and out of the market at the right time, need you to believe that they can predict the future. The markets are far too efficient to allow this. The markets are random and unpredictable.

This really means that all the knowable information is in the price of the security right now.

There will always be stock pickers and market timers that outperform for the short term. The problem for investors is that there is no correlation between past performance and future results. In other words past success by a money manager is short term and not sustainable.

The Wall Street bullies use these short term successes to market the next great strategy.  Remember the bullies make money when money moves/trades.

To succeed in reaching your long term financial goals requires you to

  • Own equities.
  • Globally diversify.
  • Rebalance.

The market returns are there for the taking. With an investor coach at your side you can reach your long term financial goals.

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