Foolish Forecasts

Like more and more of us I no longer read the printed press. Yet I know what the newspaper money supplements will be full of at this time of year: useless - useless - financial forecasts for 2017.

 "  HatTip  " is written by Nick Lincoln, IFA

"HatTip" is written by Nick Lincoln, IFA

How do I know this? Because it happens every year; it is as guaranteed as the sun rising in the east, as certain as that extra dose of misery unveiled in the Christmas Day East Enders episode.

But if these forecasts really are useless, how come they come around, again and again?
It is because, when it comes to money, journalists and their sources can make forecasts with impunity, safe in the knowledge that they will rarely be called out on their mistakes.

And so every year, at this slow-news-time, the tired legacy media leans on the same tired old advisers, stock brokers and economists for their predictions for the coming year. And - like a stopped clock - once in a while these "experts" get it right and live off the supposed kudos for a decade or so, until their next guess hits pay-dirt and absolves them of all the dud calls in between.

 The investment journey can take a very, very long time.

The investment journey can take a very, very long time.

Remember however that investment forecasting is “no better than trying to predict the destination of a vessel based on a detailed analysis of its wake.” (Source: David Jones, Dimensional Fund Advisors)

When someone asks me "Where do you think the markets will be in 12 months?" my answer should be "if I knew, do you think I would be wasting my time talking to you?" In practice I mumble something about not having a clue and quickly try to move the conversation on.
 

 

Who cares where the markets will be in 12 months?

Not me and - ideally - not you either, to be blunt. You should perhaps be concerned about where markets will be in 10 years, probably concerned in 20 years, and definitely concerned where markets will be in 30+ years time. Why? Because, with increased longevity, societal pressures and continual legislative changes, many of us will likely be investing over the full course of our adult lives.

Over such long periods of time we can watch markets go up (as they will) and afford them to occasionally go down (as they also will, often sharply). But if we are heading out on such a long journey in terms of time, why on earth are we worried about what happens before we have barely left the drive, so to speak?

When it comes to investing it is not the journey but the destination that matters. Keep to your investment plan, ignore short term news and, to protect your Lifestyle, focus on where your finances and investments need to be at in the future, not where they are right now.

 

Faith in short-term financial forecasting is for fools. You are not a fool, are you?!

{The above is not specific financial advice aligned to your unique circumstances and requirements. If you act on this article without first reading your own body weight in Key Features Documents, personal illustrations and fund fact-sheets then you may well be struck down by lightning.}
© 2016 Nick Lincoln