How good are your predictions?

We saw from the outcome of the presidential election predictions are not necessarily accurate. Companies whose only business was to predict the outcome of the election got it wrong. Moreover, they spent hundreds of millions of dollars doing so.

The same energy goes into predicting the future of the stock market and economy. At the beginning of 2016, the prediction was the stock market was going to have a terrible year. That prediction was wrong. There was a prediction that the markets would tank if Donald Trump were elected. That proved wrong also.

I know you can see where I am going with this.

Predictions can be interesting, especially if the prediction is in line with what you believe emotionally. However, following a prediction is really a futile exercise. In addition, following our emotions to manage money is not a good thing to do either.

Steve Forbes, the publisher of Forbes Magazine, once remarked, ‘You make more money selling advice than following it. It is one of the things we count on in the magazine business – along with the short memory of our readers.’

At this time of year, the news bombards us with predictions about what the future may hold for our portfolios. These outlooks are often accompanied by recommended investment strategies and actions that aim at trying to avoid the next crisis or missing the next ‘great’ opportunity. Do not believe them. They are all guesses.

There is data that substantiates moving in and out of the stock market to time ups and downs produces inferior investment returns. Those who make changes to a long-term investment strategy based on short- term noise and predictions will most likely be disappointed by the outcome.

So, as always, my advice is to maintain a diversified portfolio, rebalance and stay on course.

Wishing you a Very Happy, Healthy and Prosperous 2017!


Investment Tips from my Dad

 

I learned about money and investments from my Dad. I would like to share some of his advice with you.

A little background. My sister is six years younger than I am and she lives in North Carolina. Over the holidays, we talked about advice Dad had shared with us and we were very surprised at how consistent his message was. We received the exact same information 6 years apart. He even used the same words.

One of his tips was how to manage money. For years, Dad ‘played’ the stock market, buying and selling based on various readings and news. He did fine but then he stopped. When he stopped trading, his portfolio was diversified into 60% stocks and 40% bonds and it did not take him long to realize that his portfolio returns were much better.

His advice to my sister and me was, diversify your money, rebalance as necessary and otherwise leave it alone.

I have never forgotten the advice and I live it every day. Thank you Dad.