Today I am making the case that we should not listen to financial predictions we find on regulars media or financial websites.
No one single economist predicted COVID
No one single economist predicted the horrendous invasion of Ukraine
No one predicted that the economy would be so strong with the stock market up 18% in 8 months.
I have two friends who make their investment based on the news they read or on their political beliefs, and one more who became a crypto-currency bro.
My ultra-conservative friend
One of my friends is ultra-conservative and he believes that the whole economy will fall apart because President Biden is in the White House and because Justin Trudeau is our Prime Minister. For this friend, the liberal theories of those world leaders will bring Canada and the US to financial ruin.
My conservative friend invest in short term securities, gold, and silver.
Needless to say, for decades his portfolio has drastically underperformed the market. Even if the market drops 50% tomorrow, he would still underperform. He has allowed his conservation views on society and politics cloud his judgement and he’s paying dearly.
My optimist friend and the next big thing
My other friend friend reads The Globe and Mail’s stars and dogs weekly column that it’s always trying to uncover the next big stock. He has had some big successes and some huge failures, but overall, his portfolio has not beaten the index.
My cryptocurrency friends
I have more than one friend who have been bitten by the cryptocurrency bug. They have put everything they have and then borrowed some more, in order to buy an assortment of different cryptocurrencies.
One of those friends lost all his capital, and the other one has lost more than 50% of his capital.
What makes this story particularly sad is that my cryptocurrency friends didn’t have a lot of money to begin with. I guess that since they didn’t have lots of resources, they saw cryptocurrency as a lottery, as a way out, and of course, they failed.
My approach
My approach for the last 10 years have been to buy the index and not to pay attention to the news or to the political noise. I have learned to buy and hold and for that I have been rewarded handsomely.
The talking-heads predicting the future
There is always some talking-head selling his views on the markets and the economy. They make money not for being correct, but by getting your attention and selling it to someone else. Hardly ever, any of those talking heads, come clean and apologize for their wrong predictions.
As a public, we have to learn to ignore those talking heads. Believe me, if they were right, they would not be selling their stories, they would be billionaires by not sharing their secrets.
There is little evidence that a president or a premier minister is an indication of how the stock market will perform. Also, if journalists were good stock pickers, they would not be journalists, they would be stock pickers.
Just buy and hold for many decades. You will make more money, you will work less, and you will have peace of mind.