I’m not going to waste your time providing a specific forecast. I could create a “confident” forecast and back it up with evidence (while ignoring all contradictory evidence) as do many industry experts. But that wouldn’t be of much help. We know from empirical studies that expert forecasts are right only about half the time. I am only interested in forecasts that are accurate, and have a history of accuracy.
My 2018 forecast doesn’t differ from prior forecasts, and will likely be the same in future years. I estimate this forecast will be accurate with 99.4% confidence (a number I just made up). Bottom line is that we know there are things we can’t predict (market, economy), and we know – thanks to Dan Ariely – that humans are predictably irrational. With that in mind, let’s get to the forecast.
- The economy/market will do something that we did not expect – Surprise!
- Investors who often watch the market will experience more stress and greater unhappiness than those that don’t
- Some predictions will be right, many will be wrong. But it will all seem obvious in hindsight
- You will be tempted to abandon your current strategy at some point due to expert forecasts and/or short-term market performance
- Investors who focus on those things they can control (i.e. your reaction to events) will have a better investment experience than those who focus on what they can’t control nor predict
- Investors who abandon their plan to chase a “winning investment” or “sure thing” will earn lower long-term returns than investors who stick with a durable investment strategy
Preparing for 2018
There is a major assumption I make in my forecast. That is investors have a durable investment strategy and/or financial plan. If there is no specific plan, then investors are like a leaf in the sea – being tossed every which way without an anchor. I can’t help those people nor will I even try. Investors need to realize that the single biggest determinant of their long-term returns are their decisions/choices. And those decisions are largely influenced by their ability to ignore the noise.
Being a good investor is not about IQ; it’s about something I call DQ. No, I’m not talking about Dairy Queen. I’m talking about your Discipline Quotient. Being a disciplined investor isn’t easy; having the right advisor can help. Not all advisors understand the psychology of discipline and decision-making, but some do. Search them out, and if you need help drop me a note. I know many advisors across the nation that “get it”.