We recently held a client appreciation event, and our guest speaker presented the argument as to why you should separate your media diet from your investment decisions.
There are more sources of information today than ever. There are still traditional sources such as newspapers, television, and magazines. But also, social media, YouTube, investing subscription services, and countless others.
While there is nothing wrong with being an informed citizen and keeping up to date on current events, one of the problems with having so much information available is knowing what information is credible.
But even finding credible news sources for investment and market insights is most likely going to steer you down an unsuccessful investment path. The reason is that most of what you hear, see, or read in the media, despite the reliability of the source, is just someone’s opinion disguised as a forecast.
David Booth writes in the attached article, that a forecast is when you have a high degree of confidence in an outcome based on well-proven models. While the weatherman/woman is certainly not perfect, they do rather consistently help us to know what today’s weather will be like before we get dressed and ready for the day. This could be considered a forecast.
Unfortunately, there are no proven models to help investors make good short-term investment decisions or forecasts when it comes to investing. Any “prediction” you hear in the media is nothing more than a guess or an opinion. If you need data to confirm that the majority of “professional investment managers” cannot forecast or outguess the market with any consistency, I invite you to check out the SPIVA Canadian Scorecard, which shows the percentage of underperforming Actively Traded Canadian Mutual Funds over different time periods.
Now, all that said, there are proven models to help you achieve investment success over longer periods. These models typically include the following characteristics:
- Globally diversified
- Avoid market timing
- Low cost & tax efficient
- Incorporate the science of investing
So, what is the difference between a forecast, a wish, and a worry? As defined by David Booth, a wish is when someone says they are forecasting that something will be at “this level” by “this time.”
A worry is when someone forecasts that something will go down at a particular time.
And, of course, a forecast is when you have a high degree of confidence in an outcome based on well-proven models.
Find more insights on this topic from Executive Chairman and Founder of Dimensional Fund Advisors, David Booth, by reading his article:
The Difference Between a Forecast, a Wish, and a Worry
*Matthews + Associates of ACPI is a trade name of Aligned Capital Partners Inc. (ACPI)* – if applicable ACPI is regulated by the Investment Industry Regulatory Organization of Canada (www.iiroc.ca) and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Joseph Curry is registered to advise in (securities and/or mutual funds) to clients residing in Ontario.
Disclosure of commissions in mutual funds in accordance with NI 81-102 (15): “Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated”.