Mike Walther of Oak Wealth Advisors explains – Predictions about future investment market performance often have more weight than they deserve, leading to financial hardships. Despite robust data, predicting market performance is nearly impossible. Learn more…
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Making predictions can be fun! Predictions about the outcome of sporting events and elections are entertaining and they generate lots of discussion. For some reason, predictions about future investment market performance have more weight placed on them than they deserve. In some cases, people suffer significant financial hardships due to following financial predictions they think will make them wealthier. The reality is that even with robust data, predicting future market performance is nearly impossible. For these reasons, Oak Wealth Advisors does not make financial predictions.
If you would like evidence that financial professionals are lousy at predicting the future performance of the markets, you need look no further than a recently released article from Avantis Investors. It illustrates that over the past five years, the consensus estimate of the S&P 500 performance was off by about 18 Percentage Points! That’s about twice the average annual return of the index itself. As you can see in their illustration, the range by which the “experts” missed their predictions was an overestimation of 21% in 2022 and an underestimation, just the year before, by about 26%. The best way to take advantage of these financial predictions… …is to ignore them and stick with your long-term investment strategy.
The year ahead is going to bring many surprises. The best investment strategy given that the uncertainty in the world is unavoidable, is to remain disciplined and avoid the noise.