Krikorian: Why investors should ignore predictions - Lowell Sun
“It is better to remain quiet and be thought a fool, than to open your mouth and remove all doubt.”
— Mark Twain
It’s the start of a new year and all of the so called “stock-market experts” in the financial media are coming out with their predictions for the upcoming year. Anyone who has read this column over the last 20 years knows I have no use for the investment gurus, prophets and talking heads in the financial media who engage in the prediction game.
Stock market forecasts and predictions are nothing more than a marketing gimmick designed to attract new viewers, listeners or clients.
Contrary to what investors may think, the financial media’s No. 1 objective is to attract viewers, not to help viewers achieve their financial goals.
The financial media comes up with these ridiculous predictions not because they know what the market is going to do. They do it because they know that’s what investors want to hear. The financial media know that investors hate uncertainty, and predictions provide a false sense of certainty.
In the following hypothetical example, your employer is requiring all employees in the company’s 401(k) plan to attend at least one out the two investment presentations being offered. One presentation is “The Stock Market’s Outlook For 2022” and the other presentation is “The Importance Of Asset Allocation.” Which presentation would you choose?
During my 25 years as an investment adviser, the one question I have been asked more than any other is “what do I think the market will do?” And every year my answer is always the same: I don’t know.
I have opinions about the market, but I would never invest our clients’ retirement savings based on those opinions. Successful investing should be based on proven investment techniques, such as asset allocation and diversification, rather than intuition and guesswork. An investment philosophy based on hunches and guesswork is a recipe for financial disaster, not financial security.
When it comes to investing, there is a big difference between good, sound information and information that sounds good. The real question investor’s should be asking themselves is: “Since no one can predict what the market is going to do, how should I be managing my portfolio?”
Martin Krikorian is president of Capital Wealth Management, a registered investment adviser providing “fee-only” investment management services located at 9 Billerica Road, Chelmsford. To schedule a free no-obligation consultation and portfolio analysis, call 978-244-9254, or email [email protected]