January is a wonderful time. Everyone ends up making predictions and saying stuff about stuff that ends up getting stuffed because almost everyone gets almost everything wrong. Ah, yes…all the gurus come crawling out of nowhere and they make their booming predictions before crawling off very quietly since most of them will be proven very wrong in the months to come. Stock market predictions are no different in this sense. Don’t believe me? Fine, let’s look at a few attempts at gazing into the crystal ball that were done recently, shall we?
Robert Prechter is Exhibit A. Back in July of last year, he boldly asserted that the Dow Jones would “fall well below 1,000” as consumer sentiment tails off and a cycle comes to its inevitable conclusion. The Dow was at 9,686.48 on the day he made his stock market predictions. Since that point in time, the Dow has risen, not fallen, and Prechter has some explaining to do. Let’s keep talking about Robert, except this time we’ll talk about Robert Shiller from Yale. His prediction for Standard &Poor’s 500 is a price target of 1,430 for this year. That would mean a year on year increase of 1.5%, which is a bit fantastical to say the least.
But what’s an investor to do when many market gurus all offer their expert and everything diverges quite wildly? Everyone’s going to be wrong some of the time, but they won’t always be wrong. Every so often, these pundits get it right and we believe that there is merit in listening to their advice some more. But saying whose advice will be correct at what time is a bit difficult. And that’s quite an understatement to make. Instead of treating all of this advice as the gospel truth, I instead suggest you use it as a starting point for yourself. Talk to others in the know and stay informed, because you can only invest off your own opinions since only you know what you need.
Defining your financial goals is perhaps the best thing to do because you will then know what has to be done and not done. Not all of that advice will apply to you (obviously) but knowing when something is not for you is absolutely vital to your own financial well-being. Your own context will decide which of that advice you can take on board and which ones you can’t. Treat your goals as a destination and investment as a roadmap and suddenly you will know exactly what you have to do to get there. And at all times, take the most conservative routes you can to achieve those goals. Why take on any more risk than you have to?
