A Prophet of Profit?

In the morning banter amongst hosts on the television business channel CNBC recently, a comment was made about the veracity and accuracy with which some high profile investors prognostications are assigned when speaking through the media.  Most investors are aware of the overwhelming success of these legendary investors such as Warren Buffet or Peter Lynch and take note when they speak.

What is less well known is that virtually all investors, if they are at it long enough, will experience abject failure in their practice of investment management.  It could be a market direction prediction, or an investment recommendation that goes south.  Nobody is immune.

Successful investment is about managing uncertainties and taking adequate measures to protect wealth from unforeseen events.  There are things which are just unknowable in advance.

Put in a present context, for several weeks commentators have been trotted out to the television stations and newspapers offering insights into the near term direction of the stock market.  The cost of offering an opinion is quite low, but the potential marketing value is quite high!  Therein lies the motivation.  And, therein lies the problem.

For an individual investor to rely on an opinion about near term stock market direction, irrespective of the reputation of the source, the cost can be quite high.  Missed gains from an unforeseen upturn in the markets are the cost and often, these gains can NEVER be recovered. 

Having a long term vision and investment plan, and making arrangements for near term cash obligations with non-volatile assets, is the antidote to trying to time the market.

All comments and suggestions are welcome.

Bob Bilkie, CFA®