Experts Cannot Predict Market Moods - as published in InsideNova.com
What “the Experts” Can’t Know About Investing
In my last column, I discussed the difference between speculating in the market’s short-term moves, versus patiently participating in it as a long-term investor. But what about those “expert” opinions from those who seem to know more about the market than you do? Can you depend on their predictions instead of your own?
Before we explore the question in the context of investing, consider last fall’s presidential election. Throughout the process – and even the day before the election – the political experts were largely wrong.
Fine that’s politics. Back to investing. How did the stock market gurus make out predicting what would happen to the markets if Donald Trump won? I happened to watch the headlines for that, and saw many a prediction for immediate U.S. stock market declines ranging from big dips to complete crashes. As we know, in real life, nothing of the sort took place.
The point is, the experts don’t know any more than we do about near-term market moves. They cannot, because they can’t accurately predict the confluence of events that will next influence the market … and even if they could, nobody knows how investors will actually react to the as-yet unknown developments.
Besides that, many “experts” who are in the business of making market predictions have ulterior motives. They know their predictions easily sway people, susceptible as we are to a potent mix of emotions and biases. Whenever one guru disappoints, along comes another with a tantalizing newsletter, exciting show or sure-fire secret to success. And for only $9.99 (plus s&h), you can be in on the action.
Unless you are one of the very few who can listen to, but completely ignore these gurus’ urgent calls to action, you’re probably best off tuning out the noise and revisiting the investment recipe I suggested in my last column. It bears repeating here: To participate in the market’s expected long-term returns, save some money, invest it according to your personal goals and risk tolerances, remain patiently disciplined and diversified, and ignore “experts” trying to distract you with their short-term market predictions.