Don’t Rely on a Crystal Ball! Use Research to Plan for Your Financial Future

Don’t Rely on a Crystal Ball! Use Research to Plan for Your Financial Future by Jeff Holland{2:15 minutes to read} At amusement parks, the fortune-teller is always a major attraction.

Predictions are fun. Predictions are entertaining. Ultimately, though, predictions cause problems – especially in the market. Using predictions to plan your financial future is extremely risky.

That is because successful market prognosticators simply do not exist. When one speculates, one gambles, and making predictions is another version of speculation and gambling. When predictions appear to work well, people experience hindsight bias and tend to remember them. However, the truth is that the predictor just took a lucky guess.

A perfect example is the price of oil, which has lowered in value by 50% over the past year. No one predicted this precipitous drop; it came as a complete surprise. If the drop of oil price could have been predicted, then so could other things, and our jobs would be much easier.

At Via Four, though, we do not pay attention to predictions. We invest based on empirical, Nobel Prize-winning research. Our success as investors comes from our ability to plan, not predict, by using cutting-edge data.

Nevertheless, as 2016 rolls in the big banks and investment houses will come out with predictions for the upcoming year. While interesting, these predictions will have no real economic value; because the market is an effective information processing machine, all of the predictions are already embedded therein.   

Investing is not predicting. Predictions should be viewed as entertainment only, and should not be used to plan your financial future.

Talk to us about how we can help you use current research to inform your choices. Visit our website for further information.

Jeff Holland

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