Forecast Season (Investing)
By: Ted Black, CFP©
Winter 2023 (Vol. 40, No. 4)
Particularly as we enter a new year, the financial services industry, and the print, online and broadcast media that cover it seem to love market predictions. Whether they are bullish, bearish, conservative, or outrageous, we’re treated to what is essentially a non-stop onslaught of market prognostications from a host of individuals with impressive sounding résumés.
Anytime I come across some market guru pinning a specific number on the year-to-come market performance, I view it for entertainment purposes only, and it has absolutely no impact on my investment decision making process. “Mr. or Ms. Adams, who is a very nice individual that graduated with honors from their Ivy League school and now works for some big- time Wall Street firm says the market is going to go up … or down … X% this year.” Hmnnn.
There’s no question that this industry attracts some of the best and brightest minds in the world, who have good intentions and essentially unlimited research resources. They have significant in-house support and often have direct access to high-ranking corporate leaders and government officials. They can and do create very compelling arguments. But being bright and well educated, even experienced and clever, doesn’t really qualify one to be able to predict the future. Does anything?
I think at best, these efforts are about as valuable as predicting the weather. With some level of confidence, I believe you may be able to use current conditions and the information you have at the moment to reasonably predict what is likely happen in the next few days or so. However, drawing specific conclusions about the climate (or the stock market) on any given day 6 to 12 months down the road is really nothing more than a guess.
I bring this up as a cautionary tale. Be careful to protect yourself from allowing these predictions, regardless of how convincingly they’re presented, to exert any influence on your investment decision making process. In-depth research and analysis are absolutely required of any serious attempt to build and maintain an investment portfolio that’s designed to meet your long- term goals. Rather than chasing predictions, your focus should be on trying to control the things that you can.
Building a portfolio that has an appropriate risk/ reward profile for your situation and temperament; purchasing only high quality investments; paying attention to fees and expenses; recognizing tax consequences; and keeping a long-term outlook are all areas of focus that are likely to serve you better than any prediction.
It all starts with a plan. Understanding your current financial situation, clearly identifying your financial goals and desires, creating a plan to get from point A to point B, and recognizing the challenges and opportunities that lie between you and your goals, will be time well spent. This type of personal financial analysis will help you build a solid foundation from which you can make informed decisions about your financial future, and provides the critical information you need to build an appropriate investment portfolio. Consider this exercise the financial equivalent of an exhaustive medical exam - with all the same prevention and early-detection benefits.
If you have any questions about your current investment strategy or about mapping out your financial future, please feel free to contact Ted Black, CFP© at 407-475-0001, extension 3, or email Ted at ted@royalpalminvestmentadvisors.com.
Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.