If you’re like me, you will have seen dozens of experts boldly predicting the 2011 performance of stocks, bonds, currencies, gold, real estate … just about anything you can imagine.
I have a prediction too. Some of these “experts” will be right, some will be wrong, and there’s almost no way to tell the right predictions from the wrong ones. The sad truth is that very few get it right consistently. Yes, some will be right in 2011. But the following year, many of these suddenly famous gurus will get it wrong.
Do you remember Elaine Garzarelli? She shot to fame by forecasting the huge crash in October 1987. But then she predicted a further large drop. Instead, we had a 10-year bull market. (Credit to Professor Burton Malkiel for that observation.)
Then there were the many internet analysts who predicted the sky was the limit. They were right in 1998 and 1999, but very wrong in 2000 and 2001. Many of their “can’t miss” recommendations went bankrupt.
There is a Warren Buffett, but he’s famous because he is so rare. Identifying the next Buffett is virtually impossible.
So what’s an investor to do? Keep a well-diversified portfolio that fits your needs, current situation and risk profile, and don’t worry about predictions of what may happen in the next 12 months. A comprehensive financial plan is based on what is right for you long-term. Market forecasts should only impact your plan at the margin. A savvy investor reads as much as he or she can, but with a skeptical eye.
Please let me know if you would like to discuss your finances. I am happy to meet on an introductory, no-commitments basis.
Here’s to a great 2011.