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Are you better off consulting a market forecaster or a psychic?

Are you better off consulting a market forecaster or a psychic?

March 25, 2021
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Many investors want guidance from experts who can tell them what the stock market will do in the near future.

It doesn't matter if these experts are consistently inaccurate or even if they're wrong more often than predictions based on random chance. The continuing desire to know what the future holds means that the professional prognosticators will have many more chances to get it wrong.

One of the reasons the future behavior of the market is so hard to predict is that millions of investors are in a way also making their best guess at a future outcome. They are directing their money to companies, sectors, and funds they believe will give them a return. If not tomorrow, then at least in the near future.

Add to this the unpredictability of the future events that publicly-held companies will be responding to. Given the infinite array of possibilities, it's no wonder that foreseeing with accuracy what stocks will do today, let alone next week, is impossible.

Warren Buffet once wrote in a shareholder newsletter, "We've long felt that the only value of stock forecasters is to make fortunetellers look good."1

Not long ago, the New York Post ran a profile on a psychic who is making good on this comparison.2

According to the article, Hae Jun Jeon is being tapped by dozens of big-money players in finance and tech for advice on how to invest.

She told the Post, "I've had many instances where I've told traders, 'Be more open-minded today' because I pulled a Capricorn card." She says that her clients then put in a trade they normally wouldn't have and make a lot of money.

Of course, Jeon won't give the names of actual clients who've made money this way. And her so-called advice is sufficiently fuzzy to seem like it could be true through confirmation bias (cherry-picking evidence). But she does have two things going for her.

First, in addition to investing tips she gives her clients predictions about their love life. This is something that is in high demand and not available from a typical stock market forecaster.

Second, along with knowing how to tell the future she knows a lot about finance. Jeon used to be a strategist and analyst for one of the largest Wall Street firms.

It's interesting that she's now experiencing greater success reading Tarot cards than in her former career making predictions based on past market data.

Getting advice about sound investing principles isn't bad. In fact, it’s important. You just want to avoid getting what passes as “advice” from someone who is telling you that they know the future with certainty.

Instead, the prudent investor will benefit from a trusted advisor who can tailor a long-term plan based on evidence, coupled with important information about you as an investor: your unique risk tolerance, time horizon, and specific financial needs and goals.

Sources:

1. http://go.efficientadvisors.com/e/91522/letters-1992-html/6x2n74/1137868719?h=2Qgc2FsrvinSbwekty0xn8FTM0qE1jNv069XPfmQDV4

2. http://go.efficientadvisors.com/e/91522/wall-street-traders-depend-on-/6x2n76/1137868719?h=2Qgc2FsrvinSbwekty0xn8FTM0qE1jNv069XPfmQDV4

Disclosure:

The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.