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Market Prediction Nonsense

May 26, 2016

Every financial publication, blog and show has its “gurus” making stock market predictions. As far as I am concerned they are all nonsense.

Keep in mind that for every buyer there is a seller thinking the opposite. And anyone that has a fix on the market will certainly not be blabbing it on national television.

However, I want to make my own prediction, and you can take it or leave it. Here it is: “At some point in the future the stock market will either be higher or lower than it is today.”

That’s a fact. Now I want to offer a qualification. If your investment horizon is less than seven to ten years, ignore everybody because anything can occur in the “short” period up to ten years. I suggest you should never take the risk of the stock market if you need the use and/or benefit of the funds within ten years.

Now let’s choose a ten year or longer period. Question: Do you think the stock market, as a whole, or as measured by the major stock indexes, will be higher or lower in ten years? If yes, then perhaps you should invest in the market. If no, then skip it. If you don’t know about the market, have no opinion or are afraid of the “risk”, then you should also skip it, but first continue reading.

If you don’t know, that is valid, but what don’t you know? You should have some feeling about the health, strength and potential for growth of the U.S. economy; and if you do, do you feel it will be better at the end of ten years? If worse, then skip the market. If yes, then you should consider investing some of your funds in the stock market.

If you do not have any knowledge about investing in stocks, I suggest you should make some effort to learn enough so you could hopefully participate in the economy’s possible growth.

If you are afraid of the market, then what are you afraid of? And also examine the real risks. With a well-diversified portfolio the real risk is either that stocks right now are way overpriced, that stock market values would plummet irrespective of the strength of the economy or that the U.S. economy would collapse. These should be considered along with the many other risks in whatever way you choose to invest and considering that the stock market could be a way to balance some of these other risks.

Predictions for the short term, i.e. less than ten years, many times are ego driven nonsense and I contend should be ignored. However, longer term predictions go to the essence of your overall financial future strength and security for specific goals. You must realize that what you are doing now will need to provide adequate funds for what you are investing for or for cash flow to last for the rest of your life. Understand this and act accordingly, and skip the short term nonsense.

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